Foreign bank entry, credit allocation and lending rates in emerging markets: Empirical evidence from Poland

Degryse, Hans; Havrylchyk, Olena; Jurzyk, Emilia; Kozak, Sylwester

doi:10.1016/j.jbankfin.2011.12.006

Cited by 82 publications

(57 citation statements)

References 36 publications

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“…We also find the conditions under which all firms will be borrowing in foreign currency (full pooling equilibria), as well as no foreign currency loans will be 5 offered by banks to firms who cannot prove they have either high or foreign currency income (market failure). The key predictions of our model are consistent with for example recent evidence by Degryse, Havrylchyk, Jurzyk and Kozak (2012) who find that foreign banks that enter via greenfield investment, and that may face more information asymmetry than those foreign banks that enter via domestic take-overs, lend more in foreign currency.…”

Section: Introductionsupporting

confidence: 88%

Information Asymmetry and Foreign Currency Borrowing by Small Firms

2013

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We model the choice of loan currency in a framework which features a trade-off between lower cost of debt and the risk of firm-level distress costs. Under perfect information foreign currency funds come at a lower interest rate, all foreign currency earners as well as those local currency earners with high revenues and/or low distress costs choose foreign currency loans. When the banks have imperfect information on the currency and level of firm revenues, even more local earners switch to foreign currency loans, as they do not bear the full cost of the corresponding credit risk.

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Section: Introductionsupporting

confidence: 88%

Information Asymmetry and Foreign Currency Borrowing by Small Firms

2013

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“…Fidrmuc et al (2011) show that the intention of households to take FX loans in Eastern Europe is related to household age, education and savings in FX. Finally, Degryse et al (2011) provide evidence that suggests that FX lending in Poland is related to bank ownership. Examining a dataset on Polish banks for the period 1996-2006 they find that in particular greenfield foreign banks provide more FX loans than domestic banks.…”

Section: Bank Ownership and Client Structurementioning

confidence: 93%

Foreign banks and foreign currency lending in emerging Europe

Brown

Haas

2012

Economic Policy

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SUMMARYBased on survey data from 193 banks in 20 countries we provide the first bank-level analysis of the relationship between bank ownership, bank funding and foreign currency (FX) lending across emerging Europe. Our results contradict the widespread view that foreign banks have been driving FX lending to retail clients as a result of easier access to foreign wholesale funding. Our cross-sectional analysis shows that foreign banks do lend more in FX to corporate clients but not to households. Moreover, we find no evidence that wholesale funding had a strong causal effect on FX lending for either foreign or domestic banks. Panel estimations show that the foreign acquisition of a domestic bank does lead to faster growth in FX lending to households. However, this is driven by faster growth in household lending in general not by a shift towards FX lending.-Martin Brown and Ralph De Haas

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“…20 20 The likelihood of a decline in net output in this setting is even greater when foreign lenders' supply of capital is limited such they are only able screen and finance a fraction α of the cream firms. In this setting, it can be shown that there exists an open economy equilibrium where αθ C cream firms are screened and financed by the foreign lenders, all other firms continue to be pooled by domestic lenders, and net output declines when ĸ * > (λ -1)(R -r * ) + (r -r * ) .…”

Section: Proposition 4 Under the Following Conditions Foreign Entrymentioning

confidence: 99%

“…Kozak [20] find that foreign banks that enter via acquisition finance more informationally-opaque firms relative to foreign banks that enter via greenfield investments.…”

Section: Evidence On Segmentation and Acquisitionsmentioning

confidence: 99%

“…There is evidence that foreign bank profitability is higher the longer the bank has operated in a country (Claessens and van Horen [17]), that cream-skimming-type behavior is less likely to occur when a foreign lender expands its existing operations within a country (Gormley [32]), and that foreign banks lend to more informationallyopaque borrowers as time passes (Degryse, Havrylchyk, Jurzyk, and Kozak [20]), but, to the author's knowledge, there is no direct analysis of whether the impact of foreign lender entry on overall credit, output, and growth changes with time after initial entry occurs.…”

Section: Scope For Future Empirical Researchmentioning

confidence: 99%

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