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Foreign bank penetration of newly opened markets in the Nordic Countries

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Author Info

  • Engwall, Lars

    (Uppsala University)

  • Marquardt, Rolf

    (Swedish Bankers Association)

  • Pedersen, Torben

    (Department of International Economics and Management, Copenhagen Business School)

  • Tschoegl, Adrian E.

    (University of Pennsylvania)

Abstract

The opening to foreign banks in Denmark, Finland, Norway and Sweden provides us with an opportunity to study entry, survival and success in a situation where the entrants were subject to the liability of foreignness but not the liability of newness. We find that despite low survival rates, on balance the entrants gained market share (in terms of the assets of the banking system) over time. Our results for the role of time, links to the home market and problems facing domestic competitors were strongly in accordance with expectations in the cases of Denmark, mixed or indeterminate for Finland and Norway, and strongly opposite in the case of Sweden. Lastly, our results are broadly consistent with the Stiglitz-Weiss argument that new entrants, in this case foreign banks, buy entry by accepting worse lending risks.

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File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/6590
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Bibliographic Info

Paper provided by Copenhagen Business School, Department of International Economics and Management in its series Working Papers with number 2-1999.

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Length: 38 pages
Date of creation: 01 Mar 1999
Date of revision:
Handle: RePEc:hhb:cbsint:1999-002

Contact details of provider:
Postal: Department of International Economics and Management, Copenhagen Business School, Howitzvej 60, DK-2000 Frederiksberg, Denmark
Phone: +45 3815 2515
Fax: +45 3815 2500
Email:
Web page: http://www.cbs.dk/departments/int/
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Related research

Keywords: entry; foreign banks; Nordic countries;

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References

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  1. Tschoegl, Adrian E, 1983. "Size, Growth, and Transnationality among the World's Largest Banks," The Journal of Business, University of Chicago Press, vol. 56(2), pages 187-201, April.
  2. Sang-Rim Choi & Adrian Tschoegl & Chwo-Ming Yu, 1986. "Banks and the world’s major financial centers, 1970–1980," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 122(1), pages 48-64, March.
  3. Sang Choi & Daekeun Park & Adrian Tschoegl, 1996. "Banks and the world’s major banking centers, 1990," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 132(4), pages 774-793, December.
  4. Siv Fagerland Jacobsen & Adrian E. Tschoegl, 1997. "The Norwegian Banks in the Nordic Consortia: A Case of International Strategic Alliances in Banking," Center for Financial Institutions Working Papers 97-39, Wharton School Center for Financial Institutions, University of Pennsylvania.
  5. Engwall, Lars & Johanson, Jan, 1990. "Banks in industrial networks," Scandinavian Journal of Management, Elsevier, vol. 6(3), pages 231-244.
  6. 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.
  7. Baldwin, John R. & Raffiquzzaman, Mohammed, 1995. "Selection Versus Evolutionary Adaptation: Learning and Post-entry Performance," Analytical Studies Branch Research Paper Series 1994072e, Statistics Canada, Analytical Studies Branch.
  8. John Sutton, 1997. "Gibrat's Legacy," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 40-59, March.
  9. Yafeh, Y. & Yosha, O., 1995. "The Strategic Use of Relationship Banking," Papers 38-95, Tel Aviv.
  10. Steinherr, A. & Huveneers, Ch., 1994. "On the performance of differently regulated financial institutions: Some empirical evidence," Journal of Banking & Finance, Elsevier, vol. 18(2), pages 271-306, January.
  11. Kindleberger, Charles P., 1983. "International banks as leaders or followers of international business : An historical perspective," Journal of Banking & Finance, Elsevier, vol. 7(4), pages 583-595, December.
  12. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  13. Heinkel, Robert L. & Levi, Maurice D., 1992. "The structure of international banking," Journal of International Money and Finance, Elsevier, vol. 11(3), pages 251-272, June.
  14. Caprio, Gerard Jr. & Klingebiel, Daniela, 1996. "Bank insolvencies : cross-country experience," Policy Research Working Paper Series 1620, The World Bank.
  15. Adrian E Tschoegl, 1987. "International Retail Banking as a Strategy: An Assessment," Journal of International Business Studies, Palgrave Macmillan, vol. 18(2), pages 67-88, June.
  16. DeYoung, Robert & Nolle, Daniel E, 1996. "Foreign-Owned Banks in the United States: Earning Market Share or Buying It?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 622-36, November.
  17. Sherrill Shaffer, 1994. "Market conduct and aggregate excess capacity in banking: a cross- country comparison," Working Papers 93-28/R, Federal Reserve Bank of Philadelphia.
  18. Ongena, S. & Smith, D.C., 1998. "Quality and duration of banking relationships," Open Access publications from Tilburg University urn:nbn:nl:ui:12-80677, Tilburg University.
  19. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December.
  20. Ball, Clifford A. & Tschoegl, Adrian E., 1982. "The Decision to Establish a Foreign Bank Branch or Subsidiary: An Application of Binary Classification Procedures," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 17(03), pages 411-424, September.
  21. S.A. Lippman & R.P. Rumelt, 1982. "Uncertain Imitability: An Analysis of Interfirm Differences in Efficiency under Competition," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 418-438, Autumn.
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Citations

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Cited by:
  1. Kosmidou, Kyriaki & Pasiouras, Fotios & Tsaklanganos, Angelos, 2007. "Domestic and multinational determinants of foreign bank profits: The case of Greek banks operating abroad," Journal of Multinational Financial Management, Elsevier, vol. 17(1), pages 1-15, February.
  2. Mutinelli, Marco & Piscitello, Lucia, 2001. "Foreign direct investment in the banking sector: the case of Italian banks in the '90s," International Business Review, Elsevier, vol. 10(6), pages 661-685, December.
  3. Jean-Paul Abraham & Peter van Dijcke, 2002. "European Financial Cross-Border Consolidation: At the crossroads in Europe? By exception, evolution or revolution?," SUERF Studies, SUERF - The European Money and Finance Forum, number 22 edited by Morten Balling.
  4. Dopico, Luis G. & Wilcox, James A., 2002. "Openness, profit opportunities and foreign banking," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 12(4-5), pages 299-320.
  5. Aneta Hryckiewicz & Oskar Kowalewski, 2008. "The Economic Determinants and Engagement Models of Foreign Banks in Central Europe," National Bank of Poland Working Papers 50, National Bank of Poland, Economic Institute.
  6. Adrian E. Tschoegl, 2004. "Financial Crises and the Presence of Foreign Banks," International Finance 0405016, EconWPA.
  7. Hans Degryse & Steven Ongena, 2002. "Bank-Firm Relationships and International Banking Markets," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(3), pages 401-417.
  8. Aneta Hryckiewicz & Oskar Kowalewski, 2010. "Why do Foreign Banks Withdraw from other Countries? A Panel Data Analysis," CESifo Working Paper Series 3006, CESifo Group Munich.
  9. Chen, Sheng-Hung & Liao, Chien-Chang, 2011. "Are foreign banks more profitable than domestic banks? Home- and host-country effects of banking market structure, governance, and supervision," Journal of Banking & Finance, Elsevier, vol. 35(4), pages 819-839, April.

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