Foreign Investment in Colombia’s Financial Sector

Author/Editor:

Adolfo Barajas ; Natalia Salazar ; Roberto Steiner

Publication Date:

November 1, 1999

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

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:

This study analyzes foreign investment in Colombia’s financial system, chronicling major changes in legislation, describing how investment flows evolved over time, and comparing performance of foreign–owned versus domestic banks. Panel data estimations reveal that financial liberalization in general had a beneficial impact on bank behavior in Colombia. Although the positive contribution of foreign entry may be overstated in recent studies by not controlling for other liberalization factors, foreign (and domestic) entry beginning in 1990 did improve bank behavior by enhancing operative efficiency and competition. However, this came at the expense of a deterioration in the loan quality of domestic banks.

Series:

Working Paper No. 1999/150

Subject:

Balance of payments Banking Commercial banks Financial institutions Foreign banks Foreign direct investment Loans Nonperforming loans

English

Publication Date:

November 1, 1999

ISBN/ISSN:

9781451856941/1018-5941

Stock No:

WPIEA1501999

Pages:

39

Please address any questions about this title to publications@imf.org