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How Important Are Foreign Banks in European Transition Countries? A Comparative Analysis

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Author Info

  • Hanneke Bol

    (University of Groningen)

  • Jakob de Haan

    (University of Groningen)

  • Bert Scholtens

    (University of Groningen)

  • Ralph de Haas

    (De Nederlandsche Bank)

Abstract

This paper analyses the development of the banking sector in twelve transition countries. Foreign banks have become major players in the financial system of these countries. Still, foreign bank presence and financial development in general vary considerably between these economies. Distance from the home country is an important determinant for a foreign bank to enter a specific country. The most frequently used mode of entry is buying (part) of a domestic bank. This share is gradually expanded until a majority share is held. It turns out that foreign banks have, in general, higher profitability and efficiency levels than domestic banks.

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Bibliographic Info

Paper provided by EconWPA in its series International Finance with number 0209005.

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Date of creation: 22 Sep 2002
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Handle: RePEc:wpa:wuwpif:0209005

Note: Type of Document - Word; prepared on PC; to print on HP;
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Web page: http://128.118.178.162

Related research

Keywords: Comparative Financial Systems; Financial Markets; Financial Institutions; Financial Development; Transition Economies.;

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References

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  1. Ralph de Haas, 2002. "Finance, law and growth during transition: a survey," International Finance 0209001, EconWPA.
  2. Steinherr, Alfred, 1997. "Banking Reforms in Eastern European Countries," Oxford Review of Economic Policy, Oxford University Press, vol. 13(2), pages 106-25, Summer.
  3. Mohsin S. Khan & A. Senhadji Semlali, 2000. "Financial Development and Economic Growth," IMF Working Papers 00/209, International Monetary Fund.
  4. Hermes, Niels & Lensink, Robert, 2001. "The impact of foreign bank entry on domestic banking markets: a note," Research Report 01E62, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  5. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
  6. Claudia M. Buch, 1999. "Why Do Banks Go Abroad? � Evidence from German Data," Kiel Working Papers 948, Kiel Institute for the World Economy.
  7. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 717-37, August.
  8. Claessens, Stijn & Demirguc-Kunt, Asl[iota] & Huizinga, Harry, 2001. "How does foreign entry affect domestic banking markets?," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 891-911, May.
  9. Nancy L. Wagner & Dora M. Iakova, 2001. "Financial Sector Evolution in the Central European Economies," IMF Working Papers 01/141, International Monetary Fund.
  10. Sabi, Manijeh, 1996. "Comparative Analysis of Foreign and Domestic Bank Operations in Hungary," Journal of Comparative Economics, Elsevier, vol. 22(2), pages 179-188, April.
  11. 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.
  12. Scholtens, Bert, 2000. "Financial regulation and financial system architecture in Central Europe," Journal of Banking & Finance, Elsevier, vol. 24(4), pages 525-553, April.
  13. Cludia M. Buch, 1997. "Opening up for foreign banks: How Central and Eastern Europe can benefit," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 5(2), pages 339-366, November.
  14. R.T.A. de Haas & I. van Lelyveld, 2002. "Foreign Bank Penetration and Bank Credit Stability in Central and Eastern Europe," Research Series Supervision (discontinued) 43, Netherlands Central Bank, Directorate Supervision.
  15. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
  16. Hasan, Iftekhar & Marton, Katherin, 2003. "Development and efficiency of the banking sector in a transitional economy: Hungarian experience," Journal of Banking & Finance, Elsevier, vol. 27(12), pages 2249-2271, December.
  17. Lukasz Konopielko, 1999. "Foreign Banks' Entry into Central and East European Markets: Motives and Activities," Post-Communist Economies, Taylor & Francis Journals, vol. 11(4), pages 463-485.
  18. Kraft, Evan & Tirtiroglu, Dogan, 1998. "Bank Efficiency in Croatia: A Stochastic-Frontier Analysis," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 282-300, June.
  19. John P. Bonin & Istvan Abel, 2000. "Retail Banking in Hungary: A Foreign Affair?," William Davidson Institute Working Papers Series 356, William Davidson Institute at the University of Michigan.
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Citations

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Cited by:
  1. Marko Košak & Peter Zajc & Jelena Zorić, 2009. "Bank efficiency differences in the new EU member states," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 9(2), pages 67-90, December.
  2. Buch, Claudia M. & Heinrich, Ralph P. & Schertler, Andrea, 2003. "External and Internal Financial Structures in Europe: A Corporate Finance Perspective," EIFC - Technology and Finance Working Papers 19, United Nations University, Institute for New Technologies.

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