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Does foreign bank branch activity affect lending behavior?

Author

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  • Oskar Kowalewski

    (IESEG School of Management (LEM-CNRS-UMR 9221))

Abstract

In this study, we examine the effects of foreign branch activity on commercial banks in the Central, Eastern, and Southeastern European countries for the period 1995-2015. We show that more foreign bank branches are present in countries that have higher taxes and regulatory restrictions on bank activity. The increased activity of bank branches negatively a ects foreign-owned bank lending, and to a lesser extent, that of state-owned banks. We attribute this finding to the fact that branches and foreign-owned banks compete for the same type of clients, namely, multinational corporations. The branch e ect seems to be larger for corporate loans than for consumer loans, which confirms our assumptions. Moreover, we find that the negative effect is stronger for foreign banks owned by multinational banks than by non-bank entities.

Suggested Citation

  • Oskar Kowalewski, 2019. "Does foreign bank branch activity affect lending behavior?," Working Papers 2019-ACF-02, IESEG School of Management.
    • Handle: RePEc:ies:wpaper:f201808
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    Cited by:

    1. Le, Huong Nguyen Quynh & Nguyen, Thai Vu Hong & Schinckus, Christophe, 2022. "The role of strategic interactions in risk-taking behavior: A study from asset growth perspective," International Review of Financial Analysis, Elsevier, vol. 82(C).

    More about this item

    Keywords

    foreign bank branch; lending; subsidiary; crisis; developing markets; EU Firm performance;
    All these keywords.

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