Do foreign banks take more risk? Evidence from emerging economies

Bang Jeon, Ji Wu, Minghua Chen and Rui Wang ()
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Rui Wang: Southwestern University of Finance and Economics, Postal: Research Institute of Economics and Management, Southwestern University of Finance and Economics, Chengdu, China,

No 2016-4, School of Economics Working Paper Series from LeBow College of Business, Drexel University

Abstract: This paper addresses the impact of foreign ownership on the risk-taking behavior of banks. Using bank-level panel data of more than 1,300 commercial banks in 32 emerging economies during 2000-2013, we find that foreign owned banks take on more risk than their domestic counterparts. We further examine several factors that may potentially contribute to foreign banks’ differentiated riskiness from four perspectives, namely, foreign banks’ informational disadvantages, agency problems, the contagious effect of parent banks’ financial conditions and the disparity between home and host markets. We find supportive evidence that these factors play a significant role in affecting foreign banks’ risk-taking.

Keywords: Foreign banks; Bank risk-taking; Emerging economies (search for similar items in EconPapers)
JEL-codes: F65 G15 G21 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2016-05-14
New Economics Papers: this item is included in nep-ban, nep-net and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Journal Article: Do foreign banks take more risk? Evidence from emerging economies (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:drxlwp:2016_004

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