Bank Entry Research Articles

Bank Entry Barriers and Firms’ Risk-Taking

Bank Entry Barriers and Firms’ Risk-Taking

Local credit and international trade

AbstractThis study investigates the relationship between local access to credit and exports. A model of finance‐constrained exporters and bank entry decisions generates trade equations that we estimate with a panel of Brazilian municipal‐level trade and banking data. Literature in the financial development field has struggled to deal with the endogenous relationship between finance and economic outcomes. To untangle this reverse causality, we instrument bank presence by using geographic characteristics particular to the bank branching decision. The results show that local bank access matters: increases in bank branches per person increases bilateral exports and varieties at the city‐ and industry levels. The effect is even stronger for industries where the credit constraint binds, specifically those that use less internal funds and have more difficulty producing collateral.

Does Bank Monitoring Reduce Corporate Misreporting? Evidence from Foreign Bank Entry in China

We propose a model of bank monitoring and borrower financial misreporting. Using the staggered liberalization of the banking sector in China as a natural experiment, we find that, consistent with the model’s prediction, entry by more efficient foreign banks reduces corporate misreporting fraud. Fraud reduction is greatest among borrowers of foreign banks, but fraud also drops among borrowers of domestic banks, suggesting a spillover effect. As predicted by the model, fraud reduction is greatest for borrowers with higher levels of fixed assets or lower levels of current assets. Our evidence suggests that improved bank monitoring reduces financial misreporting. This paper was accepted by Tomasz Piskorski, finance. Funding: M. Li acknowledges support from the National Science Foundation of China [Project 71402078] and the Social Science Foundation of Tsinghua University [Project 2013WKZD004]. Supplemental Material: The online appendices and data files are available at https://doi.org/10.1287/mnsc.2022.02414 .

Banking on railroads: The effect of market access on banking provision during the Gilded Age

AbstractI examine the effect that market access, induced by the railroad network expansion, had on banking provision in nineteenth‐century America. I find that market access increased the number of national banks. This effect operated via the extensive margin, with market access increasing the probability of having a national bank for affected counties. I find that counties had more national bank activity, with increased assets, loans, deposits, and other outcomes. I do not, however, find any effect of market access on banks already in operation. Market access therefore increased banking provision chiefly through the increased entry of national banks.

Production efficiency of internet-only banks and conventional banks: Evidence from China and Japan

In recent years, Internet-only banks have begun participating in many countries' financial markets; however, their impact on these markets requires clarification. This study focused on China and Japan and covered the period from 1995 to 2019. We utilized the stochastic frontier approach to estimate the output distance function with a view to comparing production efficiency before and after the entry of Internet-only banks into the financial markets of both countries. The results revealed that China's Internet-only banks are more efficient than conventional banks, while the opposite is true in Japan. Furthermore, although Japan's Internet-only banks outperformed China's, Japan's conventional banks were less efficient than were those in China; this finding suggests that Japan's Internet-only banks adopt more advanced production technologies. Finally, the results of stochastic meta-frontier regression supported the notion that national banks in both China and Japan outperformed private banks between 2015 and 2019.

МОДЕЛІ БІЗНЕСУ УКРАЇНСЬКИХ ОЩАДНИХ БАНКІВ

In the banking system, savings banks represent a special component, as they form their resource base mainly due to the accumulation of population savings. Problem Statement. Ukrainian savings banks are a factor in ensuring financial stability, but at the same time they are vulnerable to depositors’ panic in conditions of systemic stresses. Therefore, the analysis of their activities is important for understanding the prospects of the banking system. Savings banks in Ukraine differ significantly in scale and level of business technology. Leading savings banks are planned by the state for privatization, so they are designed to improve their investment attractiveness, at the same time, the status of state ownership gives such banks additional advantages in the market. The purpose is a comparative analysis of the business models of savings banks in Ukraine and the behavior of such banks on the market. Methods. The authors used the methods of comparative analysis, logical generalization, analysis and synthesis. Results. In Ukraine, savings banks are divided by origin into two categories ( state and private capital), and by a business model into those, focused on lending to business clients and those with a balanced composition of the loan portfolio. The monopoly of the state bank was broken by the entry of banks with private capital to the market. Savings banks are identified based on the ratio of funds raised by individuals to the total amount of balances on customer accounts. A blueprint of two business models for the savings bank segment was built, the structure of assets and liabilities, the development of the branch network and market positions in terms of deposits were compared. The analysis of the efficiency of a sample of savings banks was carried out and compared with the indicators of the banking system (profitability, return on operating expenses, profitability of the loan portfolio, cost of funds of individuals, the branching of branch network), as well as the impact of the business model on the investment attractiveness of banks was assessed, the volumes of savings and allocation of funds in loans to individuals were compared. Conclusions. The research made it possible to identify a specific group of banks with heterogeneous business models: firstly, banks that use public funds mainly to finance business clients, secondly, banks that have a relatively balanced credit portfolio for individuals and legal entities. The segment of Ukrainian savings banks is clearly dominated by two large state-owned banks, and given the state of war and citizens' trust in the state itself, there is no reason to expect a change in leaders. Digitization of products and processes will allow savings banks to compensate for the reduction of the branch network, but other banks also take advantage of this opportunity. and return on investment in technological innovation projects will bring effect in the medium term. To a large extent, the amount of savings accumulated by banks depends on two factors - customer trust and assessment of service quality. Savings bank managers should pay primary attention to this. Excessively high dependence of banks on the funds of individuals can be considered as a disadvantage, rather than as an advantage, if a bank itself works inefficiently.

Financial inclusion, economic development, and inequality: Evidence from Brazil

We study a financial inclusion policy targeting Brazilian cities with low bank branch coverage using data on the universe of employees from 2000–2014. The policy leads to bank entry and to similar increases in both deposits and lending. It also fosters entrepreneurship, employment, and wage growth, especially for cities initially in banking deserts. These gains are not shared equally and instead increase with workers’ education, implying a substantial increase in wage inequality. The changes in inequality are concentrated in cities where the initial supply of skilled workers is low, indicating that talent scarcity can drive how financial development affects inequality.

Financial development and population growth: Evidence from bank concentration in China

Using 288 cities in China from 2000 to 2018, we show that a one-standard-deviation increase in bank concentration is associated with 7.9% lower population growth relative to the mean. This effect holds robust after controlling for city characteristics. Cities with higher bank concentration have less entrepreneurship and labor income. We use China's 2009 bank deregulation as a quasi-natural experiment, and find that the shock leads to significant increases in population growth for cities with new entry of joint-stock banks and city commercial banks. We argue the deregulation increases credit supply, which relieves local households' financial constraints and improves population growth.

The Impact of Foreign Banks entry in Egyptian Banking Sector on Local Banks Profitability and Performance

The Impact of Foreign Banks entry in Egyptian Banking Sector on Local Banks Profitability and Performance

Impact of Financial Liberalisation and Deregulation on Banking Sector in Pakistan

The paper analyses the market perception about the performance of Pakistani commercial banks in the wake of financial liberalisation and deregulation measures taken by the central bank over the last two decades. For this purpose, it uses the Survey approach. Out of 35 commercial banks, 15 banks have been chosen for analysis purposes. The paper mainly finds that key banking reforms have helped in removing the flaws in the banking sector of Pakistan. In particular, privatisation of banks, the deregulation and institutional strengthening measures, switching towards market-based monetary and credit management systems were instrumental in streamling banking operations. Similarly, the removal of restrictions on entry of private banks and operational restrictions on foreign banks also significantly contributed to the provision of quality banking services. The resultant competitive environment is the key factor behind improved efficiency of banks in Pakistan. The banks devised a number of strategies to respond to the competitive market conditions in the country. However, they faced various constraints in this regard, especially lack of managerial skills, and in hiring IT professionals, etc. As a part of future strategy, banks are likely to form more strategic alliances with foreign banks and undertake the expansion of business through widening of branch network. Despite a number of successful stories on different fronts, the central bank could not succeed in narrowing down the banking spread which is one of the key measures of banking performance. High domestic inflation, large non performing loans (NPLs) of banks, high administrative expenses, larger intermediation costs, and poor debt recovery are identified as important factors behind widening of banking spread. 1. INTRODUCTION The banking sector of an economy generally performs three primary functions: the facilitation of payment system, mobilisation of savings, and allocation of funds to stakeholders like government, investors, consumers, and business community who can utilise them for generation of economic activities.1 By virtue of its pivotal role, the banking sector can exert its positive influence on various segments of an economy. This gives it a privileged position among other sectors. In view of its significant role, economic managers always endeavour to devise such policies which could help provide the sector a level-playing field, thereby enabling it to operate on sound, efficient, and competitive footings. As in other emerging market economies, banks have been playing an important role in Pakistan also. However, the financial landscape of the country changed significantly in the 1970s with the nationalisation of Pakistani commercial banks. The Government also took various regressive steps, which included, among others, the initiation of subsidised bank credit schemes, the introduction of a complex system of credit ceilings, and imposition of controls on interest rates.3 These policy measures severely affected the efficiency of the banks. By the end of the 1980s, it was felt that Pakistan’s banking sector was not able to meet adequately the financial needs of the country

Foreign bank entry and the outward foreign direct investment of companies: evidence from China

Foreign bank entry and the outward foreign direct investment of companies: evidence from China

Role of foreign banks in promoting financial inclusion: “A time series analysis of five permanent members of UN security council”

PurposeFinancial Inclusion is an important determinant of bringing inclusive growth which is promoted by the foreign bank entry as it increases the market competition and brings about greater outreach. Foreign Bank Entry has been considered an impediment towards domestic markets which is misunderstood. Foreign Banks not only bring higher assets but also provide credit to government-owned enterprises, Small and Medium Enterprises, and Micro Credit. Most of the developed countries have understood this phenomenon and have achieved significant financial inclusion by liberalizing their banking industry. It is essential to conceptualize and measure the magnitude of factors, determinants, and antecedents for foreign bank entry promoting financial inclusion. MethodologyAn empirical research methodology has been adopted using the Normality test, data diagnostics for Regression, Unit Root Test, Bounds Co-Integration Test, Long Run Coefficients, and ARDL to explore the determinants of the entrance of foreign banks to promote financial inclusion. Data has been taken from 5 developed countries, United Nations Security Council's permanent members with Veto Powers including (United Kingdom, United States, Russian Federation, France, and China) for 15 years from 2004–2018, making it a sample size of 75 (n = 75) for each of the eight variables under study. FindingsThe results confirm that the foreign bank entry has a significant effect at the level and 1st order difference on the financial inclusion. OriginalityThis study is the original work of the authors and is not the exact replication of any prior study; this study provides empirical evidence and discusses the literature on Financial Inclusion and Foreign Bank Entry.

Banking competition and digital transformation

This paper explores the effects and influence mechanism of banking competition on digital transformation in Chinese listed companies, an area that has not been explored in the existing literature. Using A-share listed companies in China from 2008 to 2019 as a research sample. This paper finds that banking competition significantly promotes enterprise digital transformation. And this promoting effect is more obvious in the regions with relatively low proportion of state-owned banks and entry of non-local banks. Mechanism analysis shows that banking competition boosts enterprise digital transformation by alleviating financing constraints, reducing operating risks and increasing R&D investment.

How does financial openness affect pollution emission of industrial enterprises?—Empirical evidence from the entry of foreign banks in China

AbstractCurrently, the effects of financial openness (FO) on the environment have not been assessed at the micro level of enterprises. This article uses the difference‐in‐differences method to explore the pollution abatement effect of FO. The results show that FO can effectively promote pollution abatement with a significant environmental performance enhancement effect. In addition, the pollution abatement effect of FO is stronger in large, heavy industrial, and state‐owned enterprises. Besides, FO significantly alleviates financing constraints and promotes the pollution abatement by driving R&D investment and strengthening the intensity of end‐of‐pipe treatment. Policy recommendations are given to steadily expand the FO pattern, improve the financial disclosure system of small and medium‐sized enterprises, and optimize subsidies for increased R&D investment to stimulate pollution abatement. A reference for other emerging economies, especially transitioning economies, is provided to fully utilize the financial system under construction or improvement to realize the value of pollution control.

Foreign bank entry and export quality upgrading: evidence from a quasi-natural experiment set in China

Foreign bank entry and export quality upgrading: evidence from a quasi-natural experiment set in China

Computer-Assisted Design of Benzoisoxazol derivatives Inhibitors of Bromodomain-containing Protein 4 (BRD4) with Favorable Pharmacokinetic Profile

We performed a relation computed-aided design based on the structure of benzo[d]isoxazol derivatives inhibitors (BDIO) derivatives, new potent inhibitors of the BRD4 protein. By using in-situ modifications of the three dimensional (3D) models of BRD4-BDIOx complex (Protein Data Bank (PDB) entry code: 5Y8Z) were prepared for the training and validation sets compounds of 29 BDIOx with observed inhibitory potencies (). We first built a quantitative structure activity relationship (QSAR) model in the gas phase, linearly correlating the calculated enthalpies of the BRD4-BDIOx complex formation with (; = 0,80) first and then a superior QSAR model was brought forth, correlating computed relative Gibbs’ free energies of complexation and ( = -0.1205 + 6.9374 ; = 0.96) which was then validated by a 3D-QSAR pharmacophore generation model (PH4) ( = 0.996 + 0.0554 ; = 0.95). The structural information of the active conformation of the training set BDIOs from the models guided us in the design of a virtual combinatorial library (VCL) of 99 225 analogs. We then filtered the VCL by applying Lipinski’s rule-of-five, in order to identify new BDIOs drug likely analogs. The pharmacophore (PH4)-based screening retained 106 new and potent BDIOs with predicted inhibitory potencies up to 158 times more active than the most active traing set BDIO1 (). Finally, the predicted pharmacokinetic profiles of the best potent of these new analogs () were compared to current orally administered anticancer drugs. This computational approach, which combines molecular mechanics and the Poisson–Boltzmann (PB) implicit solvation theory, the pharmacophore model, the analysis of BRD4-BDIOs interaction energies, the in-silico screening of VCL compounds, and the inference of ADME properties resulted in a set of new suggested BRD4 inhibitors for the fight against CRPC.

The effect of banking deregulation on R&D investment: Evidence from the cross-regional operation of city banks

Improving firms’ innovation capability is crucial for promoting growth. In 2006 and 2009, China deregulated the banking industry and allowed city banks to set up branches across regions, which changed the banking structure and competition. Using data from financial licence information and 1,012,321 manufacturing firms in China during the 2004–2010 period, this study investigates the effects of banking deregulation on research and development (R&D) investment and provides a reference for firm innovation. The results show that city bank entry increases R&D investment by 0.084% and R&D investment increases by 0.037 percentage points with a 1% increase in cross-regional branches of city banks. The robustness and endogeneity tests confirm these findings. Mechanism tests reveal that city banks’ deregulation encourages firms to participate in R&D activities and improve R&D investment by reducing financing constraints. The impacts of city banks’ cross-regional operations on R&D investment are heterogeneous due to the variety in the geographical location, ownership, size, industry and age of firms. The promotion of banking deregulation on R&D investment comes from firms in the eastern region. The positive effect of banking deregulation is stronger for state-owned enterprises than private and foreign enterprises, stronger for large firms than small and medium firms, stronger for high-tech firms than ordinary firms and stronger for old firms than new firms. These findings provide evidence and implications for optimising financial structure to promote firm innovation and economic growth.

Exporting corporate social responsibility: Evidence from foreign bank entry

This paper examines the effect of foreign bank entry on local firms' social performance. We find that foreign bank entry is associated with better performance of local firms in regard to corporate social responsibility (CSR). The effect is more pronounced when firms face less favorable financial conditions and when corporate governance is weaker. Meanwhile, the role of foreign banks in promoting CSR is stronger in firms subject to environmental concerns but weaker in firms with foreign institutional investors or CEOs with overseas experiences in place. Further analyses show that foreign bank entry significantly releases firms' financial constraints, reduces corporate risk, and improves CSR awareness, further verifying the three channels of how foreign banks increase firms’ CSR performance. These findings provide valuable insights into the consequence of financial liberalization by highlighting the important role of foreign banks as intermediaries in facilitating CSR practice globally.

Credit market development and corporate earnings management: Evidence from banking and branching deregulations

We investigate how external credit market development affects corporate earnings management, by studying the impact of the U.S. interstate banking and branching deregulations on the intensity of accruals-based and real earnings management. We find that the banking and branching deregulations significantly decrease both accruals-based and real earnings-management intensity among firms in deregulated states. The effect is stronger for those deregulated states that have lower bank branch density before deregulation and states that have greater out-of-state bank entry after deregulation. The impact on corporate earnings management is channelled through increased banking competition and credit supply providing firms with easier access to external financing. The findings are robust to various endogeneity concerns. We further document that interstate banking and branching deregulations reduce the instances of financial results being subsequently affected by accounting restatements and improve firms’ information environment.

Identifying the impact of bank competition on corporate shadow banking: Evidence from China

The surge of corporate shadow banking activities in China has drawn much attention from academia and policymakers; yet very little is known about whether bank competition matters for corporate shadow banking activities. Using a large sample of Chinese listed non-financial enterprises (NFEs) over the period of 2003–2019, we identify the impact of bank competition on corporate shadow banking activities. We find a negative relation of bank competition with corporate shadow banking activities. Greater bank competition reduces corporate shadow banking activities by relaxing the firms’ financing constraints, alleviating information asymmetries, and improving their investment efficiency. Our results are robust to alternative metrics of core variables, controlling for regional characteristics, instrumental variable analysis, and the difference-in-differences estimation. Our findings suggest that a deregulation of bank entry, which increases bank competition, is an effective way to restrain corporate shadow banking activities without sacrificing economic growth.