Is Ownership Structure A Determinant Of Bank Efficiency?
Source: Central Bank of Chile
When owners could easily sell a company if it is not performing well enough provide additional incentive to the administration to act in the best interest of the stockholders, since in the merger process the actual administration will lose their job (Jensen and Ruback, 1983; Schranz, 1993). It is difficult to test this hypothesis empirically due to the difficulty in measuring some of these concepts. This paper uses cost and profit functions to estimate efficiency at the bank level in Chile. Based on these measures, the authors explain cross-bank differences over time, which are related to bank size, ownership structure, and other relevant variables.