Financial Development and Economic Growth: The Role of Foreign-Owned Banks in CESEE Countries

Abstract

This study focuses on the role of financial development in the economic growth of Central, Eastern and South-Eastern European (CESEE) countries in the post-communist era (1995)(1996)(1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011)(2012)(2013)(2014), which coincides with the opening up of financial markets to foreign investors and the global financial crisis. We investigate whether economic growth in CESEE countries has benefited from the presence of foreign-owned banks. To this end, we introduce some refined measures of financial development and control for banks' financial strength. Our results challenge the idea that bank credit fosters economic growth and that foreign-owned banks are indisputably a positive addition to local markets able to foster economic growth.

Does Financial Instability of Conventional Banks Affect Financial Stability of Islamic Banks in GCC Countries?

“…Also, financial sector development was significantly and positively related to IBs" stability. This result supports the result of Bongini et al (2017), and it is opposite from results of Growe et al (2014). While, financial crisis period, oil price volatility risk, and profitability of CBs have a negative impact, even though they have not a significant impact on financial stability of IBs.…”

“…Another variable that represents banking industry efficiency is financial sector development. Thus it may impact bank performance, as it is measured by the ratio of bank credit to the private sector divided by Gross Domestic Product (GDP) (Bongini, Iwanicz-Drozdowska, Smaga, & Witkowski, 2017), the financial sector development in some less developed countries, may enhance bank efficiency and performance. However, results from other studies indicated otherwise.…”

Capital and Liquidity Risks and Financial Stability: Pre, During and Post Financial Crisis Between Islamic and Conventional Banks in GCC Countries, in the Light of Oil Prices Decline

“…Then changed to be insignificant during the crisis period for the stability of both IBs and CBs but became negatively related to ZSC_CB. Results that positively related to financial stability supports result of Bongini et al (2017), and it is opposite from results of Growe et al (2014). While after crisis period, FSD is negatively related to stability of IBs and CBs, but it is significant at a 5% level of significance.…”

“…For instance, these studies allude that more significant development of financial sector could also create more competition, which may adversely impact the profitability of banks (Growe, DeBruine, Lee, & Maldonado, 2014). Financial sector development is measured by the ratio of bank credit to the private sector divided by GDP (Bongini, Iwanicz-Drozdowska, Smaga, & Witkowski, 2017).…”

Assessment of financial and economic security of Ukraine in conditions of foreign banking development

“…Analysis of scientific literature has shown that the problem of influence of foreign capital on state's financial and economic security requires additional research. Many scientists and bankers try to identify advantages and disadvantages of foreign capital involvement in the country's bank system (Heyets, 2006;Kornyliuk, 2012;Bongini, 2017), show pros and cons of foreign banks' activity (Chub, 2009;Levin, 1996), as well as determine the efficiency of the functioning of the country's bank system when foreign investors are engaged (Kolodiziev & Shvets, 2008;Nezhurin & Podchesova, 2013;Bruno, 2012).…”