IDEAS home Printed from https://ideas.repec.org/p/rtv/ceisrp/178.html
   My bibliography  Save this paper

Information Sharing and Cross-border Entry in European Banking

Author

Listed:

Abstract

Information asymmetries can severely limit cross-border border expansion of banks. When a bank enters a new market, it has incomplete information about potential new clients. Such asymmetries are reduced by credit registers, which distribute financial data on bank clients. We investigate the interaction of credit registers and bank entry modes (in form of branching and M&A) by using a new set of time series cross-section data for the EU-27 countries. We study how the presence of public and private credit registers and the type of information exchanged affect bank entry modes during the period 1990-2007. Our analysis shows that the existence of both types of registers increases the share of branching in the overall entries. Additionally, the establishment of public registers reduces concentration ratios, and some banking competition indicators (such as overhead costs/assets). The introduction of a private credit bureau, on the other hand, has no effect on concentration ratios, but positively contributes to competition (by decreasing interest rate margins). This suggests that credit registers facilitate direct entry through a reduction of information asymmetries, which in turn intensifies competition.

Suggested Citation

  • Caterina Giannetti & Nicola Jentzsch & Giancarlo Spagnolo, 2010. "Information Sharing and Cross-border Entry in European Banking," CEIS Research Paper 178, Tor Vergata University, CEIS, revised 21 Dec 2010.
  • Handle: RePEc:rtv:ceisrp:178
    as

    Download full text from publisher

    File URL: https://ceistorvergata.it/RePEc/rpaper/RP178.pdf
    File Function: Main text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Brown, Martin & Jappelli, Tullio & Pagano, Marco, 2009. "Information sharing and credit: Firm-level evidence from transition countries," Journal of Financial Intermediation, Elsevier, vol. 18(2), pages 151-172, April.
    2. Claeys, Sophie & Hainz, Christa, 2006. "Acquisition versus greenfield: The impact of the mode of foreign bank entry on information and bank lending rates," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 182, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    3. Van Tassel, Eric & Vishwasrao, Sharmila, 2007. "Asymmetric information and the mode of entry in foreign credit markets," Journal of Banking & Finance, Elsevier, vol. 31(12), pages 3742-3760, December.
    4. Cerutti, Eugenio & Dell'Ariccia, Giovanni & Martinez Peria, Maria Soledad, 2007. "How banks go abroad: Branches or subsidiaries?," Journal of Banking & Finance, Elsevier, vol. 31(6), pages 1669-1692, June.
    5. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    6. Inessa Love & Nataliya Mylenko, 2003. "Credit reporting and financing constraints," Policy Research Working Paper Series 3142, The World Bank.
    7. Stijn Claessens & Luc Laeven, 2004. "What drives bank competition? Some international evidence," Proceedings, Federal Reserve Bank of Cleveland, pages 563-592.
    8. Vercammen, James A, 1995. "Credit Bureau Policy and Sustainable Reputation Effects in Credit Markets," Economica, London School of Economics and Political Science, vol. 62(248), pages 461-478, November.
    9. repec:zbw:bofitp:2006_005 is not listed on IDEAS
    10. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    11. Hans Degryse & Olena Havrylchyk & Emilia Jurzyk & Sylwester Kozak, 2008. "The Effect of Foreign Bank Entry on the Cost of Credit in Transition Economies. Which Borrowers Benefit the Most?," Working Papers 2008-15, CEPII research center.
    12. Ashoka Mody & Maria Soledad Martinez Peria, 2004. "How foreign participation and market concentration impact bank spreads: evidence from Latin America," Proceedings, Federal Reserve Bank of Cleveland, pages 511-542.
    13. Marcello Bofondi & Giorgio Gobbi, 2004. "Bad Loans and Entry into Local Credit Markets," Temi di discussione (Economic working papers) 509, Bank of Italy, Economic Research and International Relations Area.
    14. Lynham, John, 2006. "Schools of Fishermen: A Theory of Information Sharing in Spatial Search," 2006 Annual meeting, July 23-26, Long Beach, CA 21442, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    15. 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.
    16. Olena Havrylchyk & Emilia Jurzyk, 2005. "Profitability of Foreign and Domestic Banks in Central and Eastern Europe : Does the Mode of Entry Matter?," Working Papers 2005-21, CEPII research center.
    17. Sophia Rabe-Hesketh & Anders Skrondal, 2012. "Multilevel and Longitudinal Modeling Using Stata, 3rd Edition," Stata Press books, StataCorp LP, edition 3, number mimus2, March.
    18. Sengupta, Rajdeep, 2007. "Foreign entry and bank competition," Journal of Financial Economics, Elsevier, vol. 84(2), pages 502-528, May.
    19. Raff, Horst & Ryan, Michael & Stähler, Frank, 2009. "The choice of market entry mode: Greenfield investment, M&A and joint venture," International Review of Economics & Finance, Elsevier, vol. 18(1), pages 3-10, January.
    20. Buch, Claudia M. & Lipponer, Alexander, 2007. "FDI versus exports: Evidence from German banks," Journal of Banking & Finance, Elsevier, vol. 31(3), pages 805-826, March.
    21. Djankov, Simeon & McLiesh, Caralee & Shleifer, Andrei, 2007. "Private credit in 129 countries," Journal of Financial Economics, Elsevier, vol. 84(2), pages 299-329, May.
    22. Robert B. Avery & Paul S. Calem & Glenn B. Canner, 2004. "Credit report accuracy and access to credit," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), vol. 90(Sum), pages 297-322.
    23. Ongena, Steven & Giannetti, Mariassunta, 2005. "Financial Integration and Entrepreneurial Activity: Evidence from Foreign Bank Entry in Emerging Markets," CEPR Discussion Papers 5151, C.E.P.R. Discussion Papers.
    24. Alberto Bennardo & Marco Pagano & Salvatore Piccolo, 2015. "Multiple Bank Lending, Creditor Rights, and Information Sharing," Review of Finance, European Finance Association, vol. 19(2), pages 519-570.
    25. Joachim Wagner, 2003. "Unobserved firm heterogeneity and the size-exports nexus: Evidence from German panel data," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 139(1), pages 161-172, March.
    26. Luoto, Jill & McIntosh, Craig & Wydick, Bruce, 2007. "Credit Information Systems in Less Developed Countries: A Test with Microfinance in Guatemala," Economic Development and Cultural Change, University of Chicago Press, vol. 55(2), pages 313-334, January.
    27. Shleifer, Andrei & La Porta, Rafael & Lopez-De-Silanes, Florencio & Vishny, Robert W., 1997. "Legal Determinants of External Finance," Scholarly Articles 30728041, Harvard University Department of Economics.
    28. Fred Houwen, 2008. "European Court of Justice clarifies circumstances in which financial institutions may exchange credit information without breaching competition law," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 16(1), pages 108-110, February.
    29. Stijn Claessens & Neeltje Van Horen, 2014. "Location Decisions of Foreign Banks and Competitor Remoteness," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(1), pages 145-170, February.
    30. Lannoo, Karel, 2008. "EU retail financial market integration: mirage or reality?," Journal of Financial Transformation, Capco Institute, vol. 23, pages 95-100.
    31. Nicola Jentzsch, 2007. "Do we need a European Directive for Credit Reporting?," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 5(2), pages 48-54, 07.
    32. Padilla, A Jorge & Pagano, Marco, 1997. "Endogenous Communication among Lenders and Entrepreneurial Incentives," Review of Financial Studies, Society for Financial Studies, vol. 10(1), pages 205-236.
    33. Pagano, Marco & Jappelli, Tullio, 1993. "Information Sharing in Credit Markets," Journal of Finance, American Finance Association, vol. 48(5), pages 1693-1718, December.
    34. Thomas Gehrig & Rune Stenbacka, 2000. "Information Sharing in Banking: A Collusive Device?," Econometric Society World Congress 2000 Contributed Papers 1837, Econometric Society.
    35. Jan Bouckaert & Hans Degryse, 2006. "Entry and Strategic Information Display in Credit Markets," Economic Journal, Royal Economic Society, vol. 116(513), pages 702-720, July.
    36. Beck, Nathaniel & Katz, Jonathan N., 1995. "What To Do (and Not to Do) with Time-Series Cross-Section Data," American Political Science Review, Cambridge University Press, vol. 89(3), pages 634-647, September.
    37. Luoto, Jill & McIntosh, Craig & Wydick, Bruce, 2007. "Credit Information Systems in Less Developed Countries: A Test with Microfinance in Guatemala," Economic Development and Cultural Change, University of Chicago Press, vol. 55(2), pages 313-334, January.
    38. Raff, Horst & Ryan, Michael & Stähler, Frank, 2005. "Asset Ownership and Foreign-Market Entry," Economics Working Papers 2006-01, Christian-Albrechts-University of Kiel, Department of Economics.
    39. Claudia M. Buch & Alexander Lipponer, 2006. "Clustering or Competition? The Foreign Investment Behavior of German Banks," International Journal of Central Banking, International Journal of Central Banking, vol. 2(2), May.
    40. Ngoc-Anh Vo Thi & Dev Vencappa, 2008. "Does the Entry Mode of Foreign Banks Matter for Bank Efficiency? Evidence from the Czech Republic,Hungary, and Poland," William Davidson Institute Working Papers Series wp925, William Davidson Institute at the University of Michigan.
    41. Robert Hauswald & Robert Marquez, 2006. "Competition and Strategic Information Acquisition in Credit Markets," Review of Financial Studies, Society for Financial Studies, vol. 19(3), pages 967-1000.
    42. Plümper, Thomas & Troeger, Vera E., 2007. "Efficient Estimation of Time-Invariant and Rarely Changing Variables in Finite Sample Panel Analyses with Unit Fixed Effects," Political Analysis, Cambridge University Press, vol. 15(2), pages 124-139, April.
    43. Thomas Müller, 2007. "Analyzing Modes of Foreign Entry: Greenfield Investment versus Acquisition," Review of International Economics, Wiley Blackwell, vol. 15(1), pages 93-111, February.
    44. Majnoni, Giovanni & Shankar, Rashmi & Varhegyi, Eva, 2003. "The dynamics of foreign bank ownership - evidence from Hungary," Policy Research Working Paper Series 3114, The World Bank.
    45. Lehner, Maria, 2008. "Entry Mode Choice of Multinational Banks," Discussion Papers in Economics 8222, University of Munich, Department of Economics.
    46. Focarelli, Dario & Pozzolo, Alberto Franco, 2001. "The patterns of cross-border bank mergers and shareholdings in OECD countries," Journal of Banking & Finance, Elsevier, vol. 25(12), pages 2305-2337, December.
    47. Papke, Leslie E. & Wooldridge, Jeffrey M., 2008. "Panel data methods for fractional response variables with an application to test pass rates," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 121-133, July.
    48. Gehrig, Thomas & Stenbacka, Rune, 2007. "Information sharing and lending market competition with switching costs and poaching," European Economic Review, Elsevier, vol. 51(1), pages 77-99, January.
    49. Thomas, Lyn C., 2000. "A survey of credit and behavioural scoring: forecasting financial risk of lending to consumers," International Journal of Forecasting, Elsevier, vol. 16(2), pages 149-172.
    50. Jan Bouckaert & Hans Degryse, 2004. "Softening Competition by Inducing Switching in Credit Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 52(1), pages 27-52, March.
    51. Berger, Allen N. & Buch, Claudia M. & DeLong, Gayle & DeYoung, Robert, 2004. "Exporting financial institutions management via foreign direct investment mergers and acquisitions," Journal of International Money and Finance, Elsevier, vol. 23(3), pages 333-366, April.
    52. Claudia M. Buch & Gayle L. DeLong, 2008. "Banking Globalization: International Consolidation and Mergers in Banking," IAW Discussion Papers 38, Institut für Angewandte Wirtschaftsforschung (IAW).
    53. Marcello Bofondi & Giorgio Gobbi, 2006. "Informational Barriers to Entry into Credit Markets," Review of Finance, European Finance Association, vol. 10(1), pages 39-67.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andreas Haufler & Ian Wooton, 2021. "Multinational banks in regulated markets: Is financial integration desirable?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(4), pages 1811-1841, November.
    2. Régis Breton & Mariana Rojas Breu & Vincent Bignon, 2013. "Monetary Union, Banks and Financial Integration," Post-Print hal-01685888, HAL.
    3. Bank for International Settlements, 2010. "Long-term issues in international banking," CGFS Papers, Bank for International Settlements, number 41, december.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Brown, Martin & Jappelli, Tullio & Pagano, Marco, 2009. "Information sharing and credit: Firm-level evidence from transition countries," Journal of Financial Intermediation, Elsevier, vol. 18(2), pages 151-172, April.
    2. Brown, Martin & Zehnder, Christian, 2010. "The emergence of information sharing in credit markets," Journal of Financial Intermediation, Elsevier, vol. 19(2), pages 255-278, April.
    3. Laptieva, Nataliia, 2016. "Information sharing and the volume of private credit in transition: Evidence from Ukrainian bank-level panel dataAuthor-Name: Grajzl, Peter," Journal of Comparative Economics, Elsevier, vol. 44(2), pages 434-449.
    4. Lehner, Maria, 2009. "Entry mode choice of multinational banks," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1781-1792, October.
    5. Samuel Fosu & Albert Danso & Henry Agyei-Boapeah & Collins G. Ntim & Emmanuel Adegbite, 2020. "Credit information sharing and loan default in developing countries: the moderating effect of banking market concentration and national governance quality," Review of Quantitative Finance and Accounting, Springer, vol. 55(1), pages 55-103, July.
    6. Claeys, Sophie & Hainz, Christa, 2006. "Acquisition versus greenfield: the impact of the mode of foreign bank entry on information and bank lending rates," Working Paper Series 653, European Central Bank.
    7. Artashes Karapetyan & Bogdan Stacescu, 2014. "Information Sharing and Information Acquisition in Credit Markets," Review of Finance, European Finance Association, vol. 18(4), pages 1583-1615.
    8. Behr, Patrick & Sonnekalb, Simon, 2012. "The effect of information sharing between lenders on access to credit, cost of credit, and loan performance – Evidence from a credit registry introduction," Journal of Banking & Finance, Elsevier, vol. 36(11), pages 3017-3032.
    9. Samuel Fosu & Albert Danso & Henry Agyei‐Boapeah & Collins G. Ntim, 2021. "Credit information sharing and bank loan pricing: Do concentration and governance matter?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5884-5911, October.
    10. Lehner, Maria, 2008. "Entry Mode Choice of Multinational Banks," Discussion Papers in Economics 8222, University of Munich, Department of Economics.
    11. Bertrand, Jérémie & Klein, Paul-Olivier, 2021. "Creditor information registries and relationship lending," International Review of Law and Economics, Elsevier, vol. 65(C).
    12. Kalyvas, Antonios Nikolaos & Mamatzakis, Emmanuel, 2014. "Does business regulation matter for banks in the European Union?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 32(C), pages 278-324.
    13. Boateng, Agyenim & Asongu, Simplice & Akamavi, Raphael & Tchamyou, Vanessa, 2018. "Information asymmetry and market power in the African banking industry," Journal of Multinational Financial Management, Elsevier, vol. 44(C), pages 69-83.
    14. Notheisen, Benedikt & Weinhardt, Christof, 2019. "The blockchain, plums, and lemons: Information asymmetries & transparency in decentralized markets," Working Paper Series in Economics 130, Karlsruhe Institute of Technology (KIT), Department of Economics and Management.
    15. Barth, James R. & Lin, Chen & Lin, Ping & Song, Frank M., 2009. "Corruption in bank lending to firms: Cross-country micro evidence on the beneficial role of competition and information sharing," Journal of Financial Economics, Elsevier, vol. 91(3), pages 361-388, March.
    16. Van Tassel, Eric, 2011. "Information disclosure in credit markets when banks' costs are endogenous," Journal of Banking & Finance, Elsevier, vol. 35(2), pages 490-497, February.
    17. Martinez Peria, Maria Soledad & Singh, Sandeep, 2014. "The impact of credit information sharing reforms on firm financing?," Policy Research Working Paper Series 7013, The World Bank.
    18. Kusi, Baah Aye & Agbloyor, Elikplimi Komla & Ansah-Adu, Kwadjo & Gyeke-Dako, Agyapomaa, 2017. "Bank credit risk and credit information sharing in Africa: Does credit information sharing institutions and context matter?," Research in International Business and Finance, Elsevier, vol. 42(C), pages 1123-1136.
    19. Shusen Qi & Ralph De Haas & Steven Ongena & Stefan Straetmans & Tamas Vadasz, 2017. "Move a Little Closer? Information Sharing and the Spatial Clustering of Bank Branches," Swiss Finance Institute Research Paper Series 17-74, Swiss Finance Institute, revised Jun 2023.
    20. Ghosh, Saibal, 2019. "Loan delinquency in banking systems: How effective are credit reporting systems?," Research in International Business and Finance, Elsevier, vol. 47(C), pages 220-236.

    More about this item

    Keywords

    credit registries; foreign entry; asymmetric information;
    All these keywords.

    JEL classification:

    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rtv:ceisrp:178. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Barbara Piazzi (email available below). General contact details of provider: https://edirc.repec.org/data/csrotit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.