Being a Foreigner Among Domestic Banks: Asset or Liability?

Author/Editor:

Neeltje van Horen ; Stijn Claessens

Publication Date:

December 1, 2009

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Studying a large number of banks in various countries between 1999 and 2006, we document that foreign banks perform better when from a high income country, when host country competition is limited, and when they are large and rely more on deposits for funding. Foreign banks' performance improves over time, possibly as they adapt, and is better when the home country is geographical or cultural (but not institutional) close to the host country. These findings show the importance of controlling for heterogeneity among foreign banks and help reconcile some contradictory results found in the literature on foreign banks' performance.

Series:

Working Paper No. 2009/273

Subject:

Bank credit Banking Commercial banks Competition Foreign banks

English

Publication Date:

December 1, 2009

ISBN/ISSN:

9781451874181/1018-5941

Stock No:

WPIEA2009273

Pages:

35

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