Changes in ownership structure and bank efficiency in Asian developing countries: The role of financial freedom

This paper investigates the effect of the changes in bank ownership on cost efficiency across twelve Asian developing economies. We also evaluate how financial freedom shapes the effect of the changes in bank ownership on cost efficiency. Using stochastic frontier approach to estimate bank efficiency scores during the period 2003-2012, we find that foreign presence improves bank efficiency, primarily in countries with high financial freedom. In addition, our results also show that increased government (domestic) ownership of bank appears to improve (impede) bank efficiency in countries with more financial freedom after financial crisis.