This paper investigates the impact of ownership, particularly strategic foreign ownership, on bank efficiency in eleven transition countries from 1996 to 2000. Using data from 225 banks and 856 observations, the authors apply stochastic frontier estimation procedures to compute profit and cost efficiency scores, accounting for both time and country effects. The results suggest that privatization alone is insufficient to increase bank efficiency, as government-owned banks are not significantly less efficient than domestic private banks. However, foreign ownership is found to lead to more efficient banks, with foreign-owned banks being more cost-efficient and providing better service, especially when they have a strategic foreign owner. The presence of international institutional investors is shown to have a positive impact on profit efficiency, facilitating technology and know-how transfer to newly privatized banks. Additionally, the study finds that larger banks are less efficient, challenging the effectiveness of government-orchestrated bank consolidation strategies. The authors conclude that the high percentage of assets held by foreign-owned banks in transition countries is driven by the rapid change in ownership structure over the past decade, and that foreign ownership, especially strategic foreign ownership, significantly enhances bank performance.This paper investigates the impact of ownership, particularly strategic foreign ownership, on bank efficiency in eleven transition countries from 1996 to 2000. Using data from 225 banks and 856 observations, the authors apply stochastic frontier estimation procedures to compute profit and cost efficiency scores, accounting for both time and country effects. The results suggest that privatization alone is insufficient to increase bank efficiency, as government-owned banks are not significantly less efficient than domestic private banks. However, foreign ownership is found to lead to more efficient banks, with foreign-owned banks being more cost-efficient and providing better service, especially when they have a strategic foreign owner. The presence of international institutional investors is shown to have a positive impact on profit efficiency, facilitating technology and know-how transfer to newly privatized banks. Additionally, the study finds that larger banks are less efficient, challenging the effectiveness of government-orchestrated bank consolidation strategies. The authors conclude that the high percentage of assets held by foreign-owned banks in transition countries is driven by the rapid change in ownership structure over the past decade, and that foreign ownership, especially strategic foreign ownership, significantly enhances bank performance.