Why foreign banks are entering transition economies: the case of Bulgaria

Abstract

This paper examines the main incentives and barriers for the FDI projects in the Bulgarian banking sector by employing a questionnaire survey data set. The derived results indicate that a high-risk environment, market size and bureaucracy have been considered similarly either by foreign banks or by any other multinationals enterprises participating in the Bulgarian business environment. On the other hand, macroeconomic instability, unstable legal framework, slow transition progress and lack of managerial skills have been highly considered by foreign banks as negative factors possibly responsible for limited FDI inflows in the banking sector. An unexpected finding was that corruption, crime and mafia are not taken into consideration at all by foreign banks.