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Being a Foreigner Among Domestic Banks: Asset or Liability?

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  • Neeltje van Horen
  • Mr. 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.

Suggested Citation

  • Neeltje van Horen & Mr. Stijn Claessens, 2009. "Being a Foreigner Among Domestic Banks: Asset or Liability?," IMF Working Papers 2009/273, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2009/273
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    More about this item

    Keywords

    WP; foreign bank; domestic bank; bank characteristic; bank performance; bank activity;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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