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Entry of Foreign Banks and their Impact on Host Countries

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Author Info
Maria Lehner
Monika Schnitzer

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Abstract

Foreign bank entry is frequently associated with spillover e¤ects for local banks and increasing competition in the local banking market. We study the impact of these e¤ects on host countries. In particular, we ask how these e¤ects interact and how they depend on the competitive environment of the host banking market. An increasing number of banks is more likely to have positive welfare e¤ects the more competitive the market environment, whereas spillovers are less likely to have positive welfare e¤ects the stronger competition. Hence, competitive e¤ects seem to reinforce each other, while spillovers and competition tend to weaken each other.

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File URL: http://www.bgpe.de/texte/DP/002_lehner_schnitzer.pdf
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File Function: First version, 2006
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Publisher Info
Paper provided by Bavarian Graduate Program in Economics (BGPE) in its series Working Papers with number 002.

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Length: 44 pages
Date of creation: Jul 2006
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Handle: RePEc:bav:wpaper:002_lehner_schnitzer

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Related research
Keywords: foreign bank entry; multinational bank; competition in banking; spillover effects;

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Find related papers by JEL classification:
F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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    Other versions:
  2. Claessens, Stijn & Demirguc-Kunt, Asl[iota] & Huizinga, Harry, 2001. "How does foreign entry affect domestic banking markets?," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 891-911, May. [Downloadable!] (restricted)
  3. Broecker, Thorsten, 1990. "Credit-Worthiness Tests and Interbank Competition," Econometrica, Econometric Society, vol. 58(2), pages 429-52, March. [Downloadable!] (restricted)
  4. Buch, Claudia M, 2003. " Information or Regulation: What Drives the International Activities of Commercial Banks?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(6), pages 851-69, December.
  5. Sophie Claeys & Christa Hainz, 2006. "Acquisition versus greenfield: The impact of the mode of foreign bank entry on information and bank lending rates," Discussion Papers 182, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
  6. Giovanni Dell'Ariccia & Ezra Friedman & Robert Marquez, 1999. "Adverse Selection as a Barrier to Entry in the Banking Industry," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 515-534, Autumn. [Downloadable!] (restricted)
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  9. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May. [Downloadable!] (restricted)
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  10. Michael Raith, 2003. "Competition, Risk, and Managerial Incentives," American Economic Review, American Economic Association, vol. 93(4), pages 1425-1436, September. [Downloadable!]
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  12. Boot, Arnoud W A & Marinc, Matej, 2006. "Competition and Entry in Banking: Implications for Stability and Capital Regulation," CEPR Discussion Papers 5518, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  13. Fries, Steven & Taci, Anita, 2005. "Cost efficiency of banks in transition: Evidence from 289 banks in 15 post-communist countries," Journal of Banking & Finance, Elsevier, vol. 29(1), pages 55-81, January. [Downloadable!] (restricted)
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  18. Robert Hauswald & Robert Marquez, 2006. "Competition and Strategic Information Acquisition in Credit Markets," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 19(3), pages 967-1000. [Downloadable!] (restricted)
  19. Blomstrom, Magnus & Kokko, Ari, 1998. " Multinational Corporations and Spillovers," Journal of Economic Surveys, Blackwell Publishing, vol. 12(3), pages 247-77, July. [Downloadable!] (restricted)
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  20. Robert Hauswald & Robert Marquez, 2003. "Information Technology and Financial Services Competition," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 16(3), pages 921-948, July. [Downloadable!] (restricted)
  21. Sharpe, Steven A, 1990. " Asymmetric Information, Bank Lending, and Implicit Contracts: A Stylized Model of Customer Relationships," Journal of Finance, American Finance Association, vol. 45(4), pages 1069-87, September. [Downloadable!] (restricted)
    Other versions:
  22. Dell'Ariccia, Giovanni & Marquez, Robert, 2004. "Information and bank credit allocation," Journal of Financial Economics, Elsevier, vol. 72(1), pages 185-214, April. [Downloadable!] (restricted)
  23. Leo Kaas, 2004. "Financial market integration and loan competition: when is entry deregulation socially beneficial?," Working Paper Series 403, European Central Bank. [Downloadable!]
  24. Vives, Xavier, 2004. "Innovation and Competitive Pressure," CEPR Discussion Papers 4369, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  25. Clarke, George & Cull, Robert & Martinez Peria, Maria Soledad & Sanchez, Susana M., 2001. "Foreign bank entry - experience, implications for developing countries, and agenda for further research," Policy Research Working Paper Series 2698, The World Bank. [Downloadable!]
  26. Linda Goldberg, 2004. "Financial-Sector FDI and Host Countries: New and Old Lessons," NBER Working Papers 10441, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  27. Panetta, Fabio & Schivardi, Fabiano & Shum, Matthew, 2005. "Do Mergers Improve Information? Evidence from the Loan Market," CEPR Discussion Papers 4961, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Sophie Claeys & Christa Hainz, 2006. "Acquisition versus greenfield: The impact of the mode of foreign bank entry on information and bank lending rates," Discussion Papers 182, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
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This page was last updated on 2009-11-25.

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