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Does foreign bank penetration affect the risk of domestic banks? Evidence from emerging economies

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Listed:
  • Jeon, Bang

    (Drexel University)

  • Wu, Ji

    (Southwestern University of Finance and Economics)

  • Chen, Minghua

    (Southwestern University of Finance and Economics)

  • Wang, Rui

    (Southwestern University of Finance and Economics)

Abstract

We investigate whether foreign bank penetration affects the risk-taking of domestic banks in emerging economies. By using bank-level data from 35 markets during the period of 2000-2014, we find significant evidence that the riskiness of domestic banks increases with the presence of foreign banks, and this finding is shown to be consistent in a series of robustness examinations. We also explore various conditions for the heterogeneity of the nexus between foreign bank penetration and domestic banks’ risk-taking, including: (1) what types of domestic banks are affected more by the presence of foreign banks, and (2) what patterns of foreign penetration exert more pronounced impact.

Suggested Citation

  • Jeon, Bang & Wu, Ji & Chen, Minghua & Wang, Rui, 2016. "Does foreign bank penetration affect the risk of domestic banks? Evidence from emerging economies," School of Economics Working Paper Series 2016-14, LeBow College of Business, Drexel University.
  • Handle: RePEc:ris:drxlwp:2016_014
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    Keywords

    Foreign bank penetration; bank risk-taking; emerging economies;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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