What Determines the Foreign Ownership Share of a Country's Banking Assets?
Ping Liang (),
Daniel M. Gropper () and
Steven B Caudill ()
Additional contact information Ping Liang: Department of Finance, College of Business, Auburn University, Auburn, AL 36849-5240, USA
Daniel M. Gropper: Department of Finance, College of Business, 415 West Magnolia, Suite 503, Auburn University, Auburn, AL 36849-5240, USA
The main purpose of this paper is to examine the roles of economic and political factors in explaining the foreign ownership share of a country's banking assets. In particular, our study includes new market-openness and regulation variables. The General Agreement on Trade in Services is an important element that affects financial sector regulation of every current and potential World Trade Organization member country, and opening financial markets is an important goal of this agreement. We find that the market openness index developed by Barth et al. (2010) bears a statistically significant relation to foreign ownership, as expected, and that regulation, rule of law, and profit opportunities are also important determinants of foreign ownership of bank assets.