Financial repression and liability of foreignness in developing countries

Using non-parametric Data Envelopment Analysis, this paper suggests that the era of financial repression in developing countries, by providing policy-induced competitive advantages to domestic banks, may create liability of foreignness for foreign banks that impeded their resource utilization. Implementation of financial liberalization programme, which endeavours to create a more market-oriented financial sector, may enable foreign banks to overcome the liability of foreignness and enhance their resource utilization.