John P. Bonin, Iftekhar Hasan and Paul Wachtel investigate the impact of ownership, particularly foreign ownership, on bank efficiency in eleven transition countries using data from 1996 to 2000. They analyze the performance of 225 banks across 856 observations, applying stochastic frontier estimation to calculate profit and cost efficiency scores, taking into account time and country effects. In second-stage regressions, they use efficiency measures and return on assets (ROA) as dependent variables, with ownership type, bank size, and country and year fixed effects as explanatory variables. Their results show that including fixed effects, especially country effects, is crucial for accurate analysis. They find that foreign-owned banks are more cost-efficient and provide better service, especially when controlled by a strategic foreign owner. International institutional investors also have a positive impact on profit efficiency. However, government-owned banks are not significantly less efficient than private banks. The study suggests that privatization alone is not sufficient to improve bank efficiency, and that the presence of many small, efficient foreign banks may explain the observed results. The findings highlight the importance of considering ownership structure in assessing bank performance in transition economies.John P. Bonin, Iftekhar Hasan and Paul Wachtel investigate the impact of ownership, particularly foreign ownership, on bank efficiency in eleven transition countries using data from 1996 to 2000. They analyze the performance of 225 banks across 856 observations, applying stochastic frontier estimation to calculate profit and cost efficiency scores, taking into account time and country effects. In second-stage regressions, they use efficiency measures and return on assets (ROA) as dependent variables, with ownership type, bank size, and country and year fixed effects as explanatory variables. Their results show that including fixed effects, especially country effects, is crucial for accurate analysis. They find that foreign-owned banks are more cost-efficient and provide better service, especially when controlled by a strategic foreign owner. International institutional investors also have a positive impact on profit efficiency. However, government-owned banks are not significantly less efficient than private banks. The study suggests that privatization alone is not sufficient to improve bank efficiency, and that the presence of many small, efficient foreign banks may explain the observed results. The findings highlight the importance of considering ownership structure in assessing bank performance in transition economies.