Foreign Investment in Colombia's Financial Sector

Barajas, Adolfo; Steiner, Roberto; Salazar, Natalia

doi:10.2139/ssrn.218069

Cited by 43 publications

(31 citation statements)

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“…29 Again, it is worth pointing out that in developing countries there is some heterogeneity across regions. 30 There are several other papers that study how foreign entry affect the performance of domestic banks, but these papers either focus on just one country (Barajas, Steiner and Salazar, 1999, focus on Colombia, Clarke et al, 2000, on Argentina, andDenizer, 2000, on Turkey) or a region Glaessner, 1999, andLaeven, 1999 …”

Section: Ownership Structure and The Performance Of Domestic Private mentioning

confidence: 99%

Bank Ownership and Performance

2004

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The views and interpretations in this document are those of the authors and should not be attributed to the Inter-American Development Bank, or to any individual acting on its behalf. Terms of use: Documents inThe Research Department (RES) produces a quarterly newsletter, IDEA (Ideas for Development in the Americas), as well as working papers and books on diverse economic issues. To obtain a complete list of RES publications and read or download them, please visit our web site at: http://www.iadb.org/res 3 Abstract * This paper builds a ne w dataset on bank ownership and bank performance covering approximately 50,000 observations for 119 countries over the 1995-2002 period. The paper then uses the dataset to reassess the relationship between bank ownership and bank performance, providing separated estimations for developing and industrial countries. It is found that, while ownership is strongly correlated with performance in developing countries, that ownership is not correlated with performance in industrial countries. In particular, the paper suggests that stateowned banks operating in developing countries tend to have lower profitability and higher costs than their private counterparts, and that the opposite is true for foreign-owned banks (which tend to be characterized by higher profitability and lower costs). We also find that, in developing countries, the entry of foreign banks plays a useful role by making domestic banks more efficient in terms of overhead cost and spreads, although we do not find any effect on profitability of domestic banks.JEL Codes: G21; D21

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Section: Ownership Structure and The Performance Of Domestic Private mentioning

confidence: 99%

Bank Ownership and Performance

2004

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“…There, foreign banks appear to be more efficient than domestic banks (Barajas, Steiner and Salazar (1999), Clarke et. al.…”

Section: Competition and Efficiencymentioning

confidence: 99%

The Role of Foreign Banks in Post-Crisis Asia: The Importance of Method of Entry

Montgomery

2003

SSRN Journal

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PREFACEThe ADB Institute aims to explore the most appropriate development paradigms for Asia composed of well-balanced combinations of the roles of markets, institutions, and governments in the post-crisis period.Under this broad research project on development paradigms, the ADB Institute Research Paper Series will contribute to disseminating works-in-progress as a building block of the project and will invite comments and questions.I trust that this series will provoke constructive discussions among policymakers as well as researchers about where Asian economies should go from the last crisis and recovery. First, using data on the presence of foreign banks via branching as well as subsidiaries, the study shows that the presence of foreign banks in the four crisis-hit countries is actually much larger than has been previously reported once the presence of foreign branches is accounted for in the data. However, the percentage of assets controlled by foreign banks in Asia is still lower than that of other emerging economies, despite great increases in the post-crisis period. The author reviews regulations on foreign bank entry that may have limited the presence of foreign banks or influenced the method of entry (branching versus subsidiary).Given recent regulatory changes and the need for bank recapitalization in the region, the presence of foreign banks is expected to increase in the near future, so this study next takes up the policy implications of this trend. To date, foreign banks in most Asian countries appear to perform relatively worse than their domestic counterparts as measured by return on equity, cost to income ratios, and the ratio of problem loans to total loans. This finding contradicts previous research in other emerging economies, and may be due to the fact that foreign bank entry in Asia is still a very recent phenomenon, and has occurred mostly through the takeover of troubled banks in the region.The second policy issue examined here is the stability of lending by foreign banks relative to domestic banks. Macroeconomic data suggests that foreign bank lending may in some cases be more stable than domestic bank lending, particularly during crisis, but that the stability of foreign bank lending varies greatly by method of entry. Cross border claims of foreign banks are the most volatile, followed by foreign bank branch lending. Lending by foreign bank subsidiaries capitalized in the host country appear to be more stable than domestic lending, perhaps providing much needed capital during times of crisis. Therefore, foreign banks play an important role in Asia, not only in the traditional ways by providing new services and stimulating competition and efficiency, but also by contributing to stability of the banking sector in the face of macroeconomic fluctuations. However, the mode of foreign entry seems to have important implications for the contributions of foreign banks. Since lending by off-shore banks and foreign bank branches seems to be more volatile than locally capitalized foreign subsidiari...

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“…The appropriateness of the Poisson model is rejected. 56 Denizer (1999); Claessens et al (2001); Barajas et al (2000); Unite and Sullivan (2003).…”

Section: Resultsmentioning

confidence: 99%

WTO and the Chinese Insurance Industry

Leverty

Lin

Zhou³

2009

Geneva Pap Risk Insur Issues Pract

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This paper provides new information on the impact of the entry of foreign firms on a financial services industry by examining the Chinese insurance industry surrounding China's accession to the World Trade Organization (WTO). Our analysis reveals that insurers experienced significant growth in total factor productivity over the sample period. We also observe a structural improvement in efficiency after WTO accession, but geographic and product market restrictions placed on foreign firms reduce these positive effects. Overall, the results are consistent with there being a significant increase in social welfare during our sample period, but they also lend support for further deregulation.

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Foreign Investment in Colombia's Financial Sector

Cited by 43 publications

References 4 publications

Bank Ownership and Performance

Bank Ownership and Performance

The Role of Foreign Banks in Post-Crisis Asia: The Importance of Method of Entry

WTO and the Chinese Insurance Industry

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