Advanced Search
MyIDEAS: Login to save this paper or follow this series

Information Sharing and Cross-border Entry in European Banking

Contents:

Author Info

  • Caterina Giannetti
  • Nicola Jentzsch
  • Giancarlo Spagnolo

Abstract

Information asymmetries can severely limit cross-border border expansion of banks. When a bank enters a new market, it has incomplete information about potential new clients. Such asymmetries are reduced by credit registers, which distribute financial data on bank clients. We investigate the interaction of credit registers and bank entry modes (in form of branching and M&A) by using a new set of time series cross-section data for the EU-27 countries. We study how the presence of public and private credit registers and the type of information exchanged affect bank entry modes during the period 1990-2007. Our analysis shows that the existence of both types of registers increases the share of branching in the overall entries. Additionally, the establishment of public registers reduces concentration ratios, and some banking competition indicators (such as overhead costs/assets). The introduction of a private credit bureau, on the other hand, has no effect on concentration ratios, but positively contributes to competition (by decreasing interest rate margins). This suggests that credit registers facilitate direct entry through a reduction of information asymmetries, which in turn intensifies competition.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.353135.de/dp980.pdf
Download Restriction: no

Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 980.

as in new window
Length: 32 p.
Date of creation: 2010
Date of revision:
Handle: RePEc:diw:diwwpp:dp980

Contact details of provider:
Postal: Mohrenstraße 58, D-10117 Berlin
Phone: xx49-30-89789-0
Fax: xx49-30-89789-200
Email:
Web page: http://www.diw.de/en
More information through EDIRC

Related research

Keywords: credit registries; foreign entry; asymmetric information;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Brown, Martin & Jappelli, Tullio & Pagano, Marco, 2008. "Information sharing and credit: Firm-level evidence from transition countries," CFS Working Paper Series 2008/34, Center for Financial Studies (CFS).
  2. Maria Soledad Martinez Peria & Ashoka Mody, 2004. "How foreign participation and market concentration impact bank spreads: evidence from Latin America," Proceedings, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, pages 511-542.
  3. Jan Bouckaert & Hans Degryse, 2004. "Softening Competition by Inducing Switching in Credit Markets," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 52(1), pages 27-52, 03.
  4. Alberto Bennardo & Marco Pagano & Salvatore Piccolo, 2008. "Multiple-Bank Lending, Creditor Rights and Information Sharing," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 211, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 28 Jul 2010.
  5. Cerutti, Eugenio & Dell'Ariccia, Giovanni & Martinez Peria, Maria Soledad, 2007. "How banks go abroad: Branches or subsidiaries?," Journal of Banking & Finance, Elsevier, Elsevier, vol. 31(6), pages 1669-1692, June.
  6. Claudia M. Buch & Alexander Lipponer, 2006. "Clustering or Competition? The Foreign Investment Behavior of German Banks," International Journal of Central Banking, International Journal of Central Banking, International Journal of Central Banking, vol. 2(2), May.
  7. Raff, Horst & Ryan, Michael & Stähler, Frank, 2009. "The choice of market entry mode: Greenfield investment, M&A and joint venture," International Review of Economics & Finance, Elsevier, Elsevier, vol. 18(1), pages 3-10, January.
  8. Jill Luoto & Craig McIntosh & Bruce Wydick, 2007. "Credit Information Systems in Less Developed Countries: A Test with Microfinance in Guatemala," Economic Development and Cultural Change, University of Chicago Press, vol. 55, pages 313-334.
  9. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," Harvard Institute of Economic Research Working Papers 1768, Harvard - Institute of Economic Research.
    • La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert W., 1998. "Law and Finance," Scholarly Articles 3451310, Harvard University Department of Economics.
    • Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
    • Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
  10. Giannetti, Mariassunta & Ongena, Steven, 2005. "Financial Integration and Entrepreneurial Activity: Evidence from Foreign Bank Entry in Emerging Markets," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5151, C.E.P.R. Discussion Papers.
  11. Gehrig, Thomas & Stenbacka, Rune, 2001. "Information Sharing in Banking: A Collusive Device?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2911, C.E.P.R. Discussion Papers.
  12. Sophia Rabe-Hesketh & Anders Skrondal, 2012. "Multilevel and Longitudinal Modeling Using Stata, 3rd Edition," Stata Press books, StataCorp LP, edition 3, number mimus2, March.
  13. Claeys, Sophie & Hainz, Christa, 2006. "Acquisition versus greenfield: the impact of the mode of foreign bank entry on information and bank lending rates," Working Paper Series, European Central Bank 0653, European Central Bank.
  14. Lehner, Maria, 2008. "Entry Mode Choice of Multinational Banks," Discussion Papers in Economics, University of Munich, Department of Economics 8222, University of Munich, Department of Economics.
  15. Padilla, Atilano Jorge & Pagano, Marco, 1996. "Endogenous Communication Among Lenders and Entrepreneurial Incentives," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1295, C.E.P.R. Discussion Papers.
  16. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Legal Determinants of External Finance," Working Paper 19443, Harvard University OpenScholar.
  17. Gehrig, Thomas & Stenbacka, Rune, 2007. "Information sharing and lending market competition with switching costs and poaching," European Economic Review, Elsevier, Elsevier, vol. 51(1), pages 77-99, January.
  18. Marcello Bofondi & Giorgio Gobbi, 2006. "Informational Barriers to Entry into Credit Markets," Review of Finance, European Finance Association, European Finance Association, vol. 10(1), pages 39-67.
  19. Inessa Love & Nataliya Mylenko, 2003. "Credit reporting and financing constraints," Policy Research Working Paper Series 3142, The World Bank.
  20. Marcello Bofondi & Giorgio Gobbi, 2004. "Bad Loans and Entry into Local Credit Markets," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 509, Bank of Italy, Economic Research and International Relations Area.
  21. Thomas Müller, 2007. "Analyzing Modes of Foreign Entry: Greenfield Investment versus Acquisition," Review of International Economics, Wiley Blackwell, vol. 15(1), pages 93-111, 02.
  22. Wagner, Joachim, 2002. "Unobserved firm heterogeneity and the size-exports nexus : evidence from German panel data," HWWA Discussion Papers 194, Hamburg Institute of International Economics (HWWA).
  23. Papke, Leslie E. & Wooldridge, Jeffrey M., 2008. "Panel data methods for fractional response variables with an application to test pass rates," Journal of Econometrics, Elsevier, Elsevier, vol. 145(1-2), pages 121-133, July.
  24. Simeon Djankov & Caralee McLiesh & Andrei Shleifer, 2005. "Private Credit in 129 Countries," NBER Working Papers 11078, National Bureau of Economic Research, Inc.
  25. Robert B. Avery & Paul S. Calem & Glenn B. Canner, 2004. "Credit report accuracy and access to credit," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), Board of Governors of the Federal Reserve System (U.S.), issue Sum, pages 297-322.
  26. Claessens, Stijn & Laeven, Luc, 2003. "What drives bank competition? some international evidence," Policy Research Working Paper Series 3113, The World Bank.
  27. Berger, Allen N. & Buch, Claudia M. & DeLong, Gayle & DeYoung, Robert, 2004. "Exporting financial institutions management via foreign direct investment mergers and acquisitions," Journal of International Money and Finance, Elsevier, Elsevier, vol. 23(3), pages 333-366, April.
  28. Fred Houwen, 2008. "European Court of Justice clarifies circumstances in which financial institutions may exchange credit information without breaching competition law," Journal of Financial Regulation and Compliance, Emerald Group Publishing, Emerald Group Publishing, vol. 16(1), pages 108-110, February.
  29. Buch, Claudia M. & Lipponer, Alexander, 2007. "FDI versus exports: Evidence from German banks," Journal of Banking & Finance, Elsevier, Elsevier, vol. 31(3), pages 805-826, March.
  30. Van Tassel, Eric & Vishwasrao, Sharmila, 2007. "Asymmetric information and the mode of entry in foreign credit markets," Journal of Banking & Finance, Elsevier, Elsevier, vol. 31(12), pages 3742-3760, December.
  31. Claessens, Stijn & Van Horen, Neeltje, 2007. "Location decisions of foreign banks and competitive advantage," Policy Research Working Paper Series 4113, The World Bank.
  32. Pagano, Marco & Jappelli, Tullio, 1993. " Information Sharing in Credit Markets," Journal of Finance, American Finance Association, American Finance Association, vol. 48(5), pages 1693-1718, December.
  33. Focarelli, Dario & Pozzolo, Alberto Franco, 2001. "The patterns of cross-border bank mergers and shareholdings in OECD countries," Journal of Banking & Finance, Elsevier, Elsevier, vol. 25(12), pages 2305-2337, December.
  34. Sengupta, Rajdeep, 2007. "Foreign entry and bank competition," Journal of Financial Economics, Elsevier, Elsevier, vol. 84(2), pages 502-528, May.
  35. Vercammen, James A, 1995. "Credit Bureau Policy and Sustainable Reputation Effects in Credit Markets," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 62(248), pages 461-78, November.
  36. Raff, Horst & Ryan, Michael & Stähler, Frank, 2005. "Asset Ownership and Foreign-Market Entry," Economics Working Papers 2006,01, Christian-Albrechts-University of Kiel, Department of Economics.
  37. Claudia M. Buch & Gayle L. DeLong, 2008. "Banking Globalization: International Consolidation and Mergers in Banking," IAW Discussion Papers, Institut für Angewandte Wirtschaftsforschung (IAW) 38, Institut für Angewandte Wirtschaftsforschung (IAW).
  38. Nicola Jentzsch, 2007. "Do we need a European Directive for Credit Reporting?," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 5(2), pages 48-54, 07.
  39. Jan Bouckaert & Hans Degryse, 2002. "Entry and Strategic Information Display in Credit Markets," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 79, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  40. Luoto, Jill & McIntosh, Craig & Wydick, Bruce, 2007. "Credit Information Systems in Less Developed Countries: A Test with Microfinance in Guatemala," Economic Development and Cultural Change, University of Chicago Press, vol. 55(2), pages 313-34, January.
  41. Hans Degryse & Olena Havrylchyk & Emilia Jurzyk & Sylwester Kozak, 2008. "The Effect of Foreign Bank Entry on the Cost of Credit in Transition Economies. Which Borrowers Benefit the Most?," Working Papers 2008-15, CEPII research center.
  42. Majnoni, Giovanni & Shankar, Rashmi & Varhegyi, Eva, 2003. "The dynamics of foreign bank ownership - evidence from Hungary," Policy Research Working Paper Series 3114, The World Bank.
  43. Robert Hauswald & Robert Marquez, 2006. "Competition and Strategic Information Acquisition in Credit Markets," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 19(3), pages 967-1000.
  44. Havrylchyk, Olena & Jurzyk, Emilia, 2006. "Profitability of foreign banks in Central and Eastern Europe: Does the entry mode matter?," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 5/2006, Bank of Finland, Institute for Economies in Transition.
  45. Lannoo, Karel, 2008. "EU retail financial market integration: mirage or reality?," Journal of Financial Transformation, Capco Institute, Capco Institute, vol. 23, pages 95-100.
  46. Thomas, Lyn C., 2000. "A survey of credit and behavioural scoring: forecasting financial risk of lending to consumers," International Journal of Forecasting, Elsevier, Elsevier, vol. 16(2), pages 149-172.
  47. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 1999. "A new database on financial development and structure," Policy Research Working Paper Series 2146, The World Bank.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Bank for International Settlements, 2010. "Long-term issues in international banking," CGFS Papers, Bank for International Settlements, number 41.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:diw:diwwpp:dp980. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bibliothek).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.