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Entry of foreign banks in the People's Republic of China: a survival analysis

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Author Info

  • M. K. Leung
  • D. Rigby
  • T. Young

Abstract

This study uses survival analysis to examine the factors determining the decision of a foreign bank to establish a branch in the PRC. Bank size and international diversification are found to have a significant positive impact on the probability of entry. Banks from Asia have particular cultural and locational advantages in this context and are found to be more likely to enter this market. Market conditions in the host economy, exemplified by an improved political environment and increasing levels of international trade, are also found to be significant determinants of the timing of entry. Access to China's banking sector will increase upon entry to the WTO and again cultural links and location are likely to play a key role for foreign entrants, particularly for those operating in local currency markets.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 35 (2003)
Issue (Month): 1 ()
Pages: 21-31

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Handle: RePEc:taf:applec:v:35:y:2003:i:1:p:21-31

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References

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  1. Gray, Jean M. & Gray, H. Peter, 1981. "The multinational bank: A financial MNC?," Journal of Banking & Finance, Elsevier, vol. 5(1), pages 33-63, March.
  2. Goldberg, Lawrence G. & Grosse, Robert, 1994. "Location choice of foreign banks in the United States," Journal of Economics and Business, Elsevier, vol. 46(5), pages 367-379, December.
  3. Yamori, Nobuyoshi, 1998. "A note on the location choice of multinational banks: The case of Japanese financial institutions," Journal of Banking & Finance, Elsevier, vol. 22(1), pages 109-120, January.
  4. Hondroyiannis, George & Papapetrou, Evangelia, 1996. "International banking activity in Greece: The recent experience," Journal of Economics and Business, Elsevier, vol. 48(3), pages 207-215, August.
  5. Goldberg, Lawrence G. & Saunders, Anthony, 1981. "The determinants of foreign banking activity in the United States," Journal of Banking & Finance, Elsevier, vol. 5(1), pages 17-32, March.
  6. Fama, Eugene F., 1985. "What's different about banks?," Journal of Monetary Economics, Elsevier, vol. 15(1), pages 29-39, January.
  7. Ursacki, Terry & Vertinsky, Ilan, 1992. "Choice of entry timing and scale by foreign banks in Japan and Korea," Journal of Banking & Finance, Elsevier, vol. 16(2), pages 405-421, April.
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Citations

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Cited by:
  1. Yang Ni & Shasha Guo & David Giles, 2010. "Capital structures in an emerging market: a duration analysis of the time interval between IPO and SEO in China," Applied Financial Economics, Taylor & Francis Journals, vol. 20(19), pages 1531-1545.
  2. Reinhold Decker & Xuemin Zhao, 2004. "SMEs' Choice of Foreign Market Entry Mode: A Normative Approach," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 3(3), pages 181-200, December.
  3. Huang, Ying & Sternquist, Brenda, 2007. "Retailers' foreign market entry decisions: An institutional perspective," International Business Review, Elsevier, vol. 16(5), pages 613-629, October.
  4. Berger, Allen N. & Hasan, Iftekhar & Zhou, Mingming, 2009. "Bank ownership and efficiency in China: What will happen in the world's largest nation?," Journal of Banking & Finance, Elsevier, vol. 33(1), pages 113-130, January.
  5. M.K. Leung & T. Young & D. Rigby, 2003. "Explaining the profitability of foreign banks in Shanghai," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 24(1), pages 15-24.
  6. Chan, Kam C. & Fung, Hung-Gay & Thapa, Samanta, 2007. "China financial research: A review and synthesis," International Review of Economics & Finance, Elsevier, vol. 16(3), pages 416-428.
  7. Jun Du & Sourafel Girma, 2011. "Cost economies, efficiency and productivity growth in the Chinese banking industry: evidence from a quarterly panel dataset," Empirical Economics, Springer, vol. 41(1), pages 199-226, August.
  8. Bontempi, Maria Elena & Prodi, Giorgio, 2009. "Entry strategies into China: The choice between Joint Ventures and Wholly Foreign-Owned Enterprises: An application to the Italian manufacturing sector," International Review of Economics & Finance, Elsevier, vol. 18(1), pages 11-19, January.
  9. Subal Kumbhakar & Dan Wang, 2007. "Economic reforms, efficiency and productivity in Chinese banking," Journal of Regulatory Economics, Springer, vol. 32(2), pages 105-129, October.
  10. Antonio Majocchi & Ulrike Mayrhofer & Joaquin Camps, 2010. "The choice between joint ventures and non equity-alliances: evidence from Italian firms," Post-Print halshs-00690216, HAL.
  11. Berger , Allen N & Hasan , Iftekhar & Zhou, Mingming, 2007. "Bank ownership and efficiency in China: what lies ahead in the world’s largest nation?," Research Discussion Papers 16/2007, Bank of Finland.

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