Foreign entry and bank competition
Abstract
Foreign entry and bank competition are modeled as the interaction between asymmetrically informed principals: the entrant uses collateral as a screening device to contest the incumbent's informational advantage. Both better information ex ante and stronger legal protection ex post are shown to facilitate the entry of low-cost outside competitors into credit markets. The entrant's success in gaining borrowers of higher quality by offering cheaper loans increases with its efficiency (cost) advantage. This paper accounts for evidence suggesting that foreign banks tend to lend more to large firms thereby neglecting small and medium enterprises. The results also explain why this observed "bias" is stronger in emerging markets.(This abstract was borrowed from another version of this item.)
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Bibliographic Info
Article provided by Elsevier in its journal Journal of Financial Economics.
Volume (Year): 84 (2007)
Issue (Month): 2 (May)
Pages: 502-528
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Web page: http://www.elsevier.com/locate/inca/505576
Related research
Keywords:Other versions of this item:
- Rajdeep Sengupta, 2006. "Foreign entry and bank competition," Working Papers 2006-043, Federal Reserve Bank of St. Louis.
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