Modes of foreign bank entry and effects on lending rates: Theory and evidence

Claeys, Sophie; Hainz, Christa

doi:10.1016/j.jce.2013.01.009

Cited by 48 publications

(16 citation statements)

References 25 publications

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“…Generally, it can be seen that foreign bank entry reduces bank lending rates and that this effect is more pronounced for greenfield entry, as Claeys and Hainz (2014) show in a sample of ten CEE countries. For Russia, Fungacova and Poghosyan (2011) find that the effect of commonly used determinants of margins differs across banks of different ownership types.…”

Section: Related Literaturementioning

confidence: 63%

The interest rate spreads in the Czech Republic: Different loans, different determinants?

2014

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Section: Related Literaturementioning

confidence: 63%

The interest rate spreads in the Czech Republic: Different loans, different determinants?

2014

Self Cite

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“…There are three main channels through which foreign bank may affect bank efficiency. First, foreign banks are more competitive in setting their interest rate (Martinez- Peria & Mody, 2004;Claeys & Hainz, 2014) than domestic banks. Foreign bank branches may exert downward pressure on prices of financial services (Levine, 1996), which in turn reduces their profit of domestic banks (Claessens et al, 2001;Claessens & Laeven, 2004).…”

Section: Empirical Reviewmentioning

confidence: 99%

“…Most of the studies conducted on foreign bank entry were done using European (Claeys & Hainz, , , ), Asian (Luo, Dong, Armitage, & Hou, ), and American (Peria & Mody, ) data. However, these studies cannot be conclusive because of differences in efficiencies for bank groups and country levels.…”

Section: Introductionmentioning

confidence: 99%

Banking efficiency in emerging economies: Does foreign banks entry matter in the Ghanaian context?

et al. 2018

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This study empirically examines the effect of foreign banks entry on banking efficiency scores, using the truncated regression data envelopment analysis model for 25s banks in Ghana, over a 6‐year period (2010–2015). We decompose the efficiency scores into three (technical, cost, and allocative efficiency), and the results indicate that banks in Ghana are marginally inefficient in operating closer to their optimal capacity. The findings show that the input‐oriented model slacks are needed to push an inefficient bank closer to where an efficient bank is positioned. From the results, an immediate and a short‐term entry of foreign banks have a consistent negative relationship with both technical‐ and cost‐efficiency scores whereas long‐term entry of foreign banks shows an inconsistent relationship with the three banking efficiency scores. Thus, the drive towards a positive impact of foreign banks entry on the three efficiency scores is dependent on the form of banking efficiency considered and the interaction term between competitive banking environment (competition) and foreign banks' entry. The study suggests that policymakers and managers in emerging markets should improve on their bank efficiencies in both a competitive banking environment and during periods of foreign bank entry. Moreover, managers of banks should make adjustment to their input resources in order to cope with new banking technologies from foreign bank entry—thereby improving banking efficiencies.

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“…Greenfield entry increases the number of banks in the domestic banking industry, which by itself promotes competition, whereas penetration through an acquisition leaves the number of banks unchanged (Martinez Peria and Mody, 2004). Van Tassel and Vishwasrao () and Claeys and Hainz () further highlight that a foreign bank enters through a greenfield investment only if its advantage in screening new applicant firms, due to, for example, better screening technology, compensates its disadvantage of having no information about incumbent firms. If a foreign bank enters via an acquisition, it acquires a credit portfolio that contains information about the quality of incumbent firms.…”

Section: Theoretical Considerations and Related Literaturementioning

confidence: 99%

Foreign Ownership and Market Power in Banking: Evidence from a World Sample

Delis¹,

Kokas²,

Ongena³

2016

J of Money Credit Banking

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Ownership and competition in the banking sector are policy concerns around the world that are rarely comprehensively examined. For 131 countries and 13 years we match bank ownership with over 50,000 bank-year estimates of individual bank market power. At the individual bank level, ownership does not explain market power. At the country level, on the other hand, foreign bank ownership has a positive and significant impact on bank market power because foreign banks enter through mergers or acquisitions and not through greenfield investments. We also find that the positive effect of foreign bank presence on market power is considerably weaker in countries with well-capitalized banks.

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Modes of foreign bank entry and effects on lending rates: Theory and evidence

Cited by 48 publications

References 25 publications

The interest rate spreads in the Czech Republic: Different loans, different determinants?

The interest rate spreads in the Czech Republic: Different loans, different determinants?

Banking efficiency in emerging economies: Does foreign banks entry matter in the Ghanaian context?

Foreign Ownership and Market Power in Banking: Evidence from a World Sample

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