Foreign Bank Entry and Credit Allocation in Emerging Markets

Author/Editor:

Sylwester Kozak ; Emilia M Jurzyk ; Hans Degryse ; Olena Havrylchyk

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:

We employ a unique data set containing bank-specific information to explore how foreign bank entry determines credit allocation in emerging markets. We investigate the impact of the mode of foreign entry (greenfield or takeover) on banks' portfolio allocation to borrowers with different degrees of informational transparency, as well as by maturities and currencies. The impact of foreign entry on credit allocation may stem from the superior performance of foreign entrants ("performance hypothesis"), or reflect borrower informational capture ("portfolio composition hypothesis"). Our results are broadly in line with the portfolio composition hypothesis, showing that borrower informational capture determines bank credit allocation.m

Series:

Working Paper No. 09/270

Subject:

English

Publication Date:

December 1, 2009

ISBN/ISSN:

9781451874150/1018-5941

Stock No:

WPIEA2009270

Format:

Paper

Pages:

43

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