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Being a Foreigner Among Domestic Banks

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  • Neeltje van Horen
  • Stijn Claessens

Abstract

Studying a large number of banks in various countries between 1999 and 2006, we document that foreign banks perform better when from a high income country, when host country competition is limited, and when they are large and rely more on deposits for funding. Foreign banks'' performance improves over time, possibly as they adapt, and is better when the home country is geographical or cultural (but not institutional) close to the host country. These findings show the importance of controlling for heterogeneity among foreign banks and help reconcile some contradictory results found in the literature on foreign banks'' performance.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/273.

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Length: 35
Date of creation: 01 Dec 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/273

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Keywords: Foreign direct investment; International banking; Bank soundness; Banking sector; Commercial banks; foreign banks; foreign bank; domestic banks; host country; foreign ownership; host countries; financial sector; direct investment; financial services; market structure; financial institutions; financial stability; foreign assets; foreign counterparts; foreign investment; foreign entry; foreign participation; investment decisions; international investment; technological progress; market size; industrial countries;

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References

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Citations

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Cited by:
  1. Sufian, Fadzlan & Habibullah, Muzafar Shah, 2012. "Globalizations and bank performance in China," Research in International Business and Finance, Elsevier, Elsevier, vol. 26(2), pages 221-239.
  2. Clarke, George R.G. & Cull, Robert & Kisunko, Gregory, 2012. "External finance and firm survival in the aftermath of the crisis : evidence from Eastern Europe and Central Asia," Policy Research Working Paper Series 6050, The World Bank.
  3. Sturm, Jan-Egbert & Williams, Barry, 2010. "What determines differences in foreign bank efficiency? Australian evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 20(3), pages 284-309, July.
  4. Cull, Robert & Xu, L. Colin, 2011. "Job growth and finance : are some financial institutions better suited to early stages of development than others?," Policy Research Working Paper Series 5880, The World Bank.
  5. Amighini, Alessia A. & Franco, Chiara, 2013. "A sector perspective on Chinese outward FDI: The automotive case," China Economic Review, Elsevier, Elsevier, vol. 27(C), pages 148-161.
  6. Hryckiewicz, Aneta & Kowalewski, Oskar, 2010. "Economic determinates, financial crisis and entry modes of foreign banks into emerging markets," Emerging Markets Review, Elsevier, Elsevier, vol. 11(3), pages 205-228, September.
  7. 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, Elsevier, vol. 35(4), pages 819-839, April.

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