Foreign Bank Entry Research Articles

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 .

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

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.

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

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.

Banking across borders with heterogeneous banks

This paper develops a model of banking across borders where banks differ in their efficiencies. Operating abroad allows the most efficient banks that have a large enough scale to overcome the associated fixed costs to increase their leverage, size and profits even more. Banking globalization increases welfare because these banks, by maximizing the return on loans and minimizing funding costs, improve the allocation of capital by channeling capital across borders. At the same time, global banking sector efficiency increases because the least efficient banks exit. Foreign exposures data for German banks deliver new model-derived stylized facts. In particular, the average efficiency of banks that operate abroad is lower for host countries that have a less efficient banking sector, are larger and feature lower impediments to foreign bank entry.

The effects of different modes of foreign bank entry in the Turkish banking sector during the 2007–2009 Global financial crisis

<abstract> <p>This paper provides insights on how foreign bank entry modes (acquisition vs. greenfield investment) in an emerging market (Turkey) influenced bank strategies during the 2007–2009 global financial crisis. Using a comprehensive dataset comprising twenty-nine accounting variables from Turkish banks' financial statements during 2005–2010, we find important differences between foreign-acquired banks and foreign bank branches in lending and sourcing funds. We find that foreign bank branches continued to support international trade by issuing import loans during 2007–2009 global financial crisis, whereas foreign-acquired banks focused on issuing consumer and credit card loans. In terms of bank sourcing funds, we find that foreign-acquired banks were able to continue to use foreign currency deposits of Turkish residents and local interbank funding including participation (Islamic) banks. Foreign bank branches, on the other hand, relied on sourcing funds from international interbank funding and foreign currency deposits of residents abroad, which led to the necessity for them to change their strategies because of funding shortage in international markets. Our results show that the presence of foreign banks in Turkish banking sector enabled the continuity of bank lending activities in host market during the turmoil of 2007–2009 global financial crisis. Our findings on foreign bank entry mode provide new evidence and have important implications for both policy makers and practitioners in emerging markets.</p> </abstract>

The challenges foreign banks face in developing markets: an exploratory study

Purpose This study aims to explore the challenges faced by foreign banks in the Kingdom of Saudi Arabia (KSA). It is important to explore the challenges as extant literature provides limited guidelines about this issue. Design/methodology/approach A mixed-method approach was used by canvassing 71 questionnaires and 36 semi-structured interviews. The sample included senior managers of foreign bank branches working in the Saudi market by the end of 2019. The quantitative data were analyzed using the distribution fitting algorithmic approach, and it is supported by the qualitative data analyzed using the thematic analysis method. Findings Results indicate that foreign banks encounter various challenges including government policies and regulations, the Saudi legal system, high “Saudization” ratio of the workforce, technological advances, high competition and overall economic change (oil price change). It seems that these challenges represent the KSA’s specific business environment. Originality/value This study will advance the extant literature on foreign bank entry with evidence from a unique context. This study could also help regulators, policymakers and bankers to better understand foreign banks’ entry into emerging and developing markets.

Foreign bank entry deregulation and stock market stability: Evidence from staggered regulatory changes

Exploring staggered quasi-exogenous regulatory changes in China, we find that the foreign bank entry deregulation significantly reduces the likelihood of stock price crashes of domestic listed firms. The effect is more pronounced among firms with worse ex-ante agency problems and performances, consistent with a monitoring spillover effect from foreign banks. Supportive evidence suggests that foreign bank entry reduces overall financing costs and extends loan maturity. Domestic firms’ corporate governance, fundamentals, and stock price efficiency improve as well. Overall, our findings highlight an unexplored role of banking sector deregulation in curtailing price crash risks and improving the stability of stock markets.

A STUDY ON CUSTOMER SATISFACTION TOWARDS E-BANKING SERVICES WITH SPECIAL REFERENCE TO AXIS BANK IN RAMANATHAPURAM TOWN

In traditional banking, the products and services handed by bank branches are not acceptable to meet the customer needs and solicitation. Customers are the king in any business. Every business should know the customer perception and satisfy their requirements.Customers are precipitously more demanding with precious services customized to their exact requirements, at least bring and instantly done. It is possible by the use of Information technology in banking sector.In Moment's script E-Banking service plays a vital part in attracting new customers and retaining old customers. Without e-banking service no banks can survive in this competitive banking business.E-Banking means the provision of information about a bank and its services through a home runner on the World Wide Web (WWW).E-Banking services give customer access to accounts, the capability to transfer their plutocrat between different accounts, and making payments or applying for loans through E- Channels. Electronic Banking is else called as Internet Banking or Virtual Banking or Online Banking or Web Banking.E – Banking is the medium and rearmost delivery channel to be offered by the retail banks.It handed number of benefits to customer in term of easy to use and at least cost of deals;it may be either through internet, telephone or other electronic delivery channels. Nationalization was a structural change in the performance of marketable banks which redounded in to the emergence of public sector banks. Privatization leads to the emergence of private sector banks and globalization which eased the entry of foreign banks in India. This super study helps to know the satisfaction position of customers towards e – banking services handed by Axis Bank in Ramanathapuram Town.Then E – Banking services includes ATM service, POS using benefit card and credit services, mobile banking and EFT etc.

A COMPARATIVE ANALYSIS BETWEEN PUBLIC AND PRIVATE SECTOR BANKS CONCERNING E-BANKING SERVICES IN THE BALASORE DISTRICT OF ODISHA

Banks play a very important role in the Indian financial market as they are the biggest purveyors of credit and attract most of the savings from the population. Banking is necessary for the economic development of all the nations of the world because a developed banking system holds the key as well as serves as a barometer for the economic health of a country. In the Indian context, there were two phases of nationalization, the introduction of RRBs, and the entry of private sector banks and foreign banks, and now e-banking is some important and major changes that affect the structure as well as the functioning of the banks over time to time. Based on the Reserve Bank of India Act, 1934, Indian banks are of two categories under two terms, one is the “Schedule Commercial Bank” and the “Non-schedule Commercial Bank”. The banks selected for this study are State Bank of India, representing public sector banks, and HDFC Bank, representing the private sector; as they are the largest banks in their sector, considering their number of branches, customer base, and net worth. The objective of the study is to find consumer satisfaction in respect of e-banking and the perception of employees for using e-banking in Public and Private sector banks in the Balasore district of Odisha. It is found that banks are heavily dependent on message alerts to promote their e-banking products and services; it is felt that they should supplement this with other modes like print media, hoardings, email, etc. to stimulate e-banking usage and create greater awareness.

Themes in Southeast European Banking: A Review of Literature

In this paper we review the literature around three main research questions: the impact of foreign bank entry on net interest margins, financial system stability and credit supply. We also motivate the focus on Southeast European (SEE) countries. SEE economies although under the umbrella of European transition economies exhibit different macroeconomic and financial sector features from these countries and as such could benefit from a more focused empirical investigation. This could tailor and improve the recommendations given to policymakers in these countries which will help promote financial and economic development. Other countries in the world that share similar macroeconomic and financial sector features could benefit from the results as well. In addition, it is argued that SEE countries offer a unique laboratory for the proposed research questions because of the dramatic increase of foreign bank presence in these countries and their low level of financial and economic development. Keywords: foreign bank entry, Southeast Europe, net interest margins, financial system stability, credit supply DOI: 10.7176/EJBM/14-18-07 Publication date: September 30 th 2022

Corruption and foreign bank entry denials: A cross‐country panel analysis

AbstractThe existing literature largely reports a negative effect of corruption on foreign direct investment (FDI) and explains it by the unwillingness of foreign investors to invest due to the high post‐entry costs and risks of corruption. However, in addition to affecting foreign investors' willingness to invest, corruption can also affect their ability to invest. This latter channel is less explored. To fill this gap, we use cross‐country panel data to analyse the relationship between corruption and foreign bank entry denials. Our fixed‐effects estimation results, as well as the following sensitivity checks show that corruption can also be an entry‐point deterrent: corrupt host countries are more likely to deny entry to foreign banks. This finding suggests that at least some foreign investors are forced rather than choose to stay out of corrupt countries. A policy implication could be that reducing the entry‐point corruption can increase foreign investment even if the post‐entry costs and risks of corruption remain unchanged.

Foreign Banks in Russia: Entry Mode, Early Evolution, and Lending Behavior

This paper analyzes the evolution of foreign capital entry into the Russian banking system and documents the current characteristics and lending behavior of 100% foreign-owned banks in Russia. Using the lessons from the recent rapid foreign banking expansion in Russia, I show that the liberalization of Russia's banking system and the attractiveness of its market opportunities were essential determinants for foreign bank entry. I find that country of origin matters in foreign bank lending preferences. In general, foreign banks from developed home countries focus on lending to Russian corporate customers while foreign banks from emerging markets follow the "follow the customer" strategy.

The Influence of Foreign Bank Entry on the Development of Regional Financial Markets

Intensive international activity of banks caused by fairly recently lifted financial restrictions in many countries has been a subject of great scientific interest ever since. The article describes various short-term consequences of foreign bank penetration in the financial markets of some of the regions of the world. The authors pay specific attention to the reasons and modes of foreign bank entry in emerging market and transition market economies as well as to the differences in the impact of such entry on the stability and efficiency of financial systems and economies of the countries of Asia, Latin America, Central and Eastern Europe and Russia. Research methods: systemic, comparative and logical analysis.

Does foreign banks entry influence domestic banks' efficiency? Evidence from Ghana

The study investigates the effect of foreign bank entry on the efficiency of domestic banks in Ghana. The study applies the Stochastic Frontier Analysis (SFA) technique and the system Generalized Method of Moments (GMM) estimator on bank specific level data, spanning the period 2000 to 2015. The results show that foreign banks with an average profit efficiency of 74.7% are more profit efficient than domestic banks with a score of 71% which conforms to the global advantage hypothesis. This suggests that foreign banks are able to maximize revenue through the generation of interest income on loans and investments better than domestic banks due to the foreign banks' comparative advantage in terms of international expertise. Further, the system GMM results indicate that the entry of foreign banks has contributed to the profit efficiency of domestic banks in Ghana. This positive spillover effect of foreign banks is manifested in their transfer of international expertise, technological knowledge, quality banking services and competitive pressure to domestic banks. In addition, bank size and liquidity are essential determinants of the profit efficiency of domestic banks in Ghana. The findings of the study imply that bank regulators in developing countries should push for reforms that eliminate implicit and explicit barriers that may hinder the entry of foreign or new banks.

ТЕНДЕНЦІЇ ДИДЖИТАЛІЗАЦІЇ СВІТОВОГО РИНКУ ФІНАНСОВИХ ПОСЛУГ

Abstract. In the conditions of Industry 4.0, rapid globalization, growing competition in the financial services market and the entry of powerful foreign banks, maintaining a competitive position requires adaptation to changing external challenges and consumer demands. It becomes urgent tofind innovative forms of activity, which in the digitalization period involves the implementation of information technologyin the activitiesof financial institutions. The goal of the article is to identify the main trends of digitalization in the global financial services market. Methods of comparative analysis, synthesis, systematization and scientific abstraction were used to achieve this goal. The article identifies the main benefits that financial institutions and consumers of financial services obtainfrom the use ofinformation technologies (API, BigData, blockchain, cloud computing, Artificial Intelligence, Internet of Things). The implementation of modern information technology in financial institutions allows to generate innovative products, formpersonalized offers for customers, optimize financial institutions’ costs, speed up customer services processes, improve management, reduce the cyber risks, attract new customers,and increase public trust tofinancial institutions. Emphasis is puton the necessity of development of apartnership model of interaction of financial institutions with IT-compamiesand FinTech-companies. In conclusion, the authors note that the deterrents to the digitalization of the Ukrainian financial services market are:underdeveloped legislation; lack of funding for R&Dand innovation projects; low digital literacy; outdated IT-infrastructure. Intensification of digitalization of financial institutions requires significant investments, developed innovative consciousness of management and development of information infrastructure. The authors singled out the prospects for further research,namely:the formation of effective and efficient mechanisms for protecting information systems of financial institutions from cyber attacks and information leakage

Examining the Development of Banking Sector Regulations and Supervision Practices across BRICS and G7 Countries

The study examines the development in the banking regulatory practices across BRICS nations over the period 2000–2019. The convergence and sustainability of the regulatory framework in BRICS nations to G7 norms have also been assessed. The analysis is based on five key regulatory measures, which include activity restrictions, entry requirements for a new bank, foreign bank entry restrictions, capital stringency, and deposit insurer powers. The study constructs the regulatory indexes based on the central bank responses to the Bank Regulation and Supervision Survey (BRSS) conducted by the World Bank. To estimate the indexes, the study follows Barth, Caprio, and Levine guidelines. The result reveals that the regulators of BRICS countries impose higher restrictions on bank activities than in the G7 nations. Furthermore, the United Kingdom and Brazilian bank regulators are more liberal and imposed fewer restrictions on insurance activity only. In addition, getting a bank license is tough in both regions. Regulators allow only fit and proper applicants into the banking domain. Furthermore, the authors find that the requirements for capital are becoming more restricted in BRICS nations between 2003 and 2019 to align with Basel capital accords, relative to G7 nations. The study documents a convergence in the banking licensing requirements, and limitations on foreign bank entry and official supervisory powers in the BRICS countries with the G7 nations. The study suggests that the regulators must offer freedom to banks’ activities with increasing supervision, and it boosts the competition in the banking sector and enhances customer welfare. Furthermore, the policymakers need to redesign the deposit insurance mechanism and equip deposit insurers with more powers to enhance the safety of depositors’ interests and minimize the moral hazards in the banking sector in both regions.