Foreign Direct Investment in the Banking Sector: Experiences and Lessons from CEECs
In this paper we use new statistics on Foreign Direct Investment (FDI) in Transitional Economies (TEs) to analyze the issue of foreign ownership in the banking sector. We find that foreign investment is associated with higher profitability; however, a substantial foreign ownership is necessary if there is to be a positive effect on cost efficiency. We also analyze the determinants of FDI location choices in TEs providing new empirical evidence, and distinguishing among different levels of foreign partnership.