Banking Reforms And Financial Stability

The impact of the banking reforms in the transition countries on the financial stability has drawn great attention recently. This paper examines the relationships among bank performance, entry strategies of foreign banks, and financial stability by employing the GMM estimation with the panel data of139banks in13transition economies from the period of1993-2008and uses country dummy variables to reveal the differences between countries. The regression results show that the stability of the foreign banks that entered host countries by means of Greenfield is generally better than other types of banks, especially when a crisis exists. Besides, because of the unique mode of the banking reform, the banking industry of China shows a stronger stability than those of other sample countries.