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What Determines the Foreign Ownership Share of a Country's Banking Assets?

Author

Listed:
  • Ping Liang

    (Department of Finance, College of Business, Auburn University, Auburn, AL 36849-5240, USA)

  • Daniel M. Gropper

    (Department of Finance, College of Business, 415 West Magnolia, Suite 503, Auburn University, Auburn, AL 36849-5240, USA)

  • Steven B. Caudill

    (Department of Business and Economics, Rhodes College, 200 North Parkway, Memphis, TN 38112-1690, USA)

Abstract

The main purpose of this paper is to examine the roles of economic and political factors in explaining the foreign ownership share of a country's banking assets. In particular, our study includes new market-openness and regulation variables. The General Agreement on Trade in Services is an important element that affects financial sector regulation of every current and potential World Trade Organization member country, and opening financial markets is an important goal of this agreement. We find that the market openness index developed by Barthet al.(2010) bears a statistically significant relation to foreign ownership, as expected, and that regulation, rule of law, and profit opportunities are also important determinants of foreign ownership of bank assets.

Suggested Citation

  • Ping Liang & Daniel M. Gropper & Steven B. Caudill, 2011. "What Determines the Foreign Ownership Share of a Country's Banking Assets?," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 14(03), pages 535-561.
    • Handle: RePEc:wsi:rpbfmp:v:14:y:2011:i:03:n:s0219091511002226
    DOI: 10.1142/S0219091511002226
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    References listed on IDEAS

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    1. Barth,James R. & Caprio,Gerard & Levine,Ross, 2008. "Rethinking Bank Regulation," Cambridge Books, Cambridge University Press, number 9780521709309.
    2. Benjamas Jirasakuldech & Donna Dudney & Thomas Zorn & John Geppert, 2011. "Financial disclosure, investor protection and stock market behavior: an international comparison," Review of Quantitative Finance and Accounting, Springer, vol. 37(2), pages 181-205, August.
    3. Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 2002. "Governance matters II - updated indicators for 2000-01," Policy Research Working Paper Series 2772, The World Bank.
    4. Barth, James R.*Caprio,Gerard*Levine, Ross, 2001. "The regulation and supervision of banks around the world - a new database," Policy Research Working Paper Series 2588, The World Bank.
    5. Allen N. Berger & Robert DeYoung & Hesna Genay & Gregory F. Udell, 1999. "Globalization of financial institutions: evidence from cross-border banking performance," Working Paper Series WP-99-25, Federal Reserve Bank of Chicago.
    6. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2006. "Governance matters V: aggregate and individual governance indicators for 1996 - 2005," Policy Research Working Paper Series 4012, The World Bank.
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    More about this item

    Keywords

    Financial regulation; governance; international banking; market openness index; WTO;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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