The Determinants of Strategic Bank Performance in Emerging Markets

Abstract

Authors: Irina V. Ivashkovskaya National Research University The Higher School of Economics iivashkovskaja@hse.ru

Ilya Markovich National Research University The Higher School of Economics Partyin ipartin@hse.ru

A Skurikhina National Research University The Higher School of Economics

This paper has examined how financial performance, ownership structure, corporate governance and macroeconomic factors affect the strategic performance of 40 public banks in Russia, Kazakhstan, Ukraine over the period from 2005 to 2010. To account for the impacts of the recent financial crisis, we separately considered the years before and during the crisis, namely the period up to 2008, and the crisis years from 2008 to 2010. We verified the integrated model of bank performance using an empirical analysis of panel data. Strategic performance of banks is measured with Economic Value Added (EVA). Our results show that strategic performance is, for the most part, explained by three factors: bank size, the growth of net interest income and state ownership for both periods. One of the key findings of the paper is that there exist differences in set of factors of the strategic performance in the pre-crisis period and in the crisis years. We demonstrated that corporate governance factors have a statistically significant effect on bank performance before the crisis. Our results provide that in the time of the crisis financial measures are more significant determinants of strategic performance.