Foreign Investment in Colombia’s Financial Sector

By Adolfo Barajas, Natalia Salazar, Roberto Steiner

November 1, 1999

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Adolfo Barajas, Natalia Salazar, and Roberto Steiner. Foreign Investment in Colombia’s Financial Sector, (USA: International Monetary Fund, 1999) accessed September 19, 2024

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.

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

Keywords: Bank behavior, Bank ownership, Banking system, Banks interest rate payment, Banks spread, Colombia, Commercial banks, Domestic bank, Financial liberalization, Foreign bank, Foreign banks, Foreign direct investment, Foreign investment, Loans, Market share, Maximization model, Nonperforming loans, Ownership bank, WP

Publication Details

Pages:

39
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1999/150
Stock No:

WPIEA1501999
ISBN:

9781451856941
ISSN:

1018-5941

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