National culture, market condition and market share of foreign bank

Abstract

In the paper, based on Breuer and McDermott's (2011) definition for national culture, we develop a theoretical model that helps explain economical behaviors of foreign bank and show that national culture is as important as credit market conditions in determining market share of foreign banks. Our model yields two interesting results. One is that market share of foreign banks is always lower than domestic banks in emerging market. Another is that in enterprise and heterogeneous society, foreign banks are likely to extend their market shares during recession in transition economies, not during prosperous one. Our theoretical findings also provide an explanation for empirical observation from Chinese emerging market.