| The objective of this dissertation is to analyze the effect of foreign bank presence on Puerto Rico commercial banks' financial performance. Empirical data consist of annual financial data from the Federal Deposit Insurance Corporation's Statistics on Depository Institutions Database, for the years 1992 through 2003. These data were used to estimate different linear statistical models for several bank performance measures. The results for three estimation methods---ordinary least squares, least squares with heteroscedasticity corrected standard errors and robust regression---consistently, show that greater foreign bank presence was linked to a decrease in competition (greater return on assets) and a reduction in efficiency (greater noninterest expense ratio) for Puerto Rico banks, whether domestic or foreign. It is recommended that future research and analysis be done to obtain a deeper understanding of Puerto Rico's banking system. |
