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Asymmetric Information and the Mode of Entry In Foreign Credit Markets

  • Eric Van Tassel

    ()

    (Department of Economics, College of Business, Florida Atlantic University)

  • Sharmila Vishwasrao

    ()

    (Department of Economics, College of Business, Florida Atlantic University)

In a newly liberalized credit market, foreign banks with cost advantages are likely to be less informed than domestic banks that hold information on credit risks. These relative advantages may generate incentives for a foreign bank to negotiate acquisition of a domestic bank in order to capture information endowments. However, if it is difficult to assess the value of information held by banks, the foreign bank will face important choices about the optimal mode of entry and what acquisition price to pay. These choices have implications for the survival of domestic banks and how capital is allocated after liberalization.

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File URL: http://home.fau.edu/svishwas/web/Mode%20of%20bank%20entry.pdf
File Function: First version, 2006
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Paper provided by Department of Economics, College of Business, Florida Atlantic University in its series Working Papers with number 06002.

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Length: 35 pages
Date of creation: Aug 2006
Date of revision:
Publication status: forthcoming in Journal of Banking and Finance
Handle: RePEc:fal:wpaper:06002
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