What makes foreign bank entry affect domestic bank performance? An empirical study of 39 countries in Asia

• Main Authors: Ai-Lian Jiang, 蔣愛蓮
• Other Authors: 謝孟芬
• Format: Others
• Language: zh-TW
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/77z8dh

碩士 === 臺中技術學院 === 事業經營研究所 === 98 === The purpose of this paper is to investigate how foreign bank entry affects domestic bank behavior and whether this relationship depends on the conditions of economic, business cycle and ease of doing business economy. We use foreign ownership calculated by using bank level data as a proxy for the degree of foreign bank entry. The panel data sample consists of 2,092 individual banks in 39 countries for the period 1994-2008. The evidence indicates that foreign banks entry can firstly raise the net interest margin, non-interest income and loan loss provision of the local banks foreign. Foreign bank entry is also associated with an increase in the loan loss provision and a decrease in both the profitability and overhead expenses of the domestic bank when majority owned by foreign ownership. Secondly, a lower level of economic development enhances the positive effects of foreign bank entry on net interest margin, non-interest income and overhead expenses and the loan loss provision of domestic banks. In addition, foreign banks react counter-cyclically to local economic conditions. Third, doing business friendly environment plays an important role in determining the effect of foreign bank entry. Foreing bank entry can more likely decrease the local banks revenues from net interest margin and non-interest income in the ease of doing business economy. To sum up, this study seeks to determine why countries with the same level of domestic bank behavior very different levels of foreign bank entry