Foreign Bank Entry and Credit Allocation in Emerging Markets
IMF Working Papers, December 1, 2009
Source details
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- Foreign Bank Entry and Credit Allocation in Emerging Markets
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Bibliographic details
- Authors: Sylwester Kozak, Emilia M Jurzyk, Hans Degryse, Olena Havrylchyk
- Published: December 1, 2009
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451874150.001
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.
Key findings
- Mode of foreign entry examined: greenfield or takeover.
- Main explanatory hypotheses:
- "performance hypothesis": superior performance of foreign entrants.
- "portfolio composition hypothesis": borrower informational capture.
- Empirical result: evidence broadly supports the portfolio composition hypothesis, indicating borrower informational capture determines bank credit allocation.
Subjects and keywords
- Subjects: Bank credit, Banking, Currencies, Foreign banks, Loans
- Keywords: bank entry, foreign bank, greenfield bank, lending rate, takeover bank, WP