IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/2158.html
   My bibliography  Save this paper

The effect of foreign entry on Argentina's domestic banking sector

Author

Listed:
  • Clarke, George R. G.
  • Cull, Robert
  • D'Amato, Laura
  • Molinari, Andrea

Abstract

The authors analyze how foreign entry affected domestic banks in Argentina during an especially intense period of entry in the mid-1990s. Their results are consistent with the hypothesis that foreign banks enter areas where they have a competitive advantage, putting pressure on the domestic banks already focused on that type of lending. They find that domestic banks with loan portfolios concentrated in manufacturing - an area to which foreign banks have traditionally devoted much of their lending - tended to have lower net margins and lower before-tax profits than other domestic banks. The informational advantages local banks enjoyed probably helped ensure that foreign banks would not drive them from the market. Domestic banks with greater consumer lending - an area in which foreign banks have not been heavily involved - had higher net margins and greater before-tax profits. Domestic banks that focused on mortgage lending - an area foreign banks entered aggressively in the mid-1990s - experienced falling net margins and increasing overhead. There were many domestic bank failures in the mid-1990s, but the banks that failed were not heavily concentrated in the types of lending favored by foreign banks.

Suggested Citation

  • Clarke, George R. G. & Cull, Robert & D'Amato, Laura & Molinari, Andrea, 1999. "The effect of foreign entry on Argentina's domestic banking sector," Policy Research Working Paper Series 2158, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2158
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1999/09/10/000094946_99082508013585/Rendered/PDF/multi_page.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Berger, Allen N, 1995. "The Relationship between Capital and Earnings in Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 432-456, May.
    2. Caprio, Gerard Jr. & Summers, Lawrence H., 1993. "Finance and its reform : beyond laissez-faire," Policy Research Working Paper Series 1171, The World Bank.
    3. Ursacki, Terry & Vertinsky, Ilan, 1992. "Choice of entry timing and scale by foreign banks in Japan and Korea," Journal of Banking & Finance, Elsevier, vol. 16(2), pages 405-421, April.
    4. Clarke, George R. G. & Cull, Robert, 1999. "Why Privatize? The Case of Argentina's Public Provincial Banks," World Development, Elsevier, vol. 27(5), pages 865-886, May.
    5. Hondroyiannis, George & Papapetrou, Evangelia, 1996. "International banking activity in Greece: The recent experience," Journal of Economics and Business, Elsevier, vol. 48(3), pages 207-215, August.
    6. 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.
    7. Goldberg, Lawrence G. & Saunders, Anthony, 1981. "The determinants of foreign banking activity in the United States," Journal of Banking & Finance, Elsevier, vol. 5(1), pages 17-32, March.
    8. Clarke, George R. G. & Cull, Robert, 1999. "Provincial bank privatization in Argentina : the why, how, and"so what"?," Policy Research Working Paper Series 2159, The World Bank.
    9. Aliber, Robert Z, 1984. "International Banking: A Survey," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(4), pages 661-678, November.
    10. Claessens, Stijn & Demirguc-Kunt, Asli & Huizinga, Harry, 1998. "How does foreign entry affect the domestic banking market?," Policy Research Working Paper Series 1918, The World Bank.
    11. Kindleberger, Charles P., 1983. "International banks as leaders or followers of international business : An historical perspective," Journal of Banking & Finance, Elsevier, vol. 7(4), pages 583-595, December.
    12. Goldberg, Lawrence G & Saunders, Anthony, 1981. "The Growth of Organizational Forms of Foreign Banks in the U.S.: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 13(3), pages 365-374, August.
    13. Grosse, Robert & Goldberg, Lawrence G., 1991. "Foreign bank activity in the United States: An analysis by country of origin," Journal of Banking & Finance, Elsevier, vol. 15(6), pages 1093-1112, December.
    Full references (including those not matched with items on IDEAS)

    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:wbk:wbrwps:2158. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi). General contact details of provider: http://edirc.repec.org/data/dvewbus.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.