Acquisition versus greenfield: the impact of the mode of foreign bank entry on information and bank lending rates

Sophie Claeys and Christa Hainz

No 653, Working Paper Series from European Central Bank

Abstract: Policy makers often decide to liberalize foreign bank entry but at the same time restrict the mode of entry. We study how different entry modes affect the interest rate for loans in a model in which domestic banks possess private information about their incumbent clients but foreign banks have better screening skills. Our model predicts that competition is stronger if market entry occurs through a greenfield investment and therefore domestic banks' interest rates are lower. We find empirical support for our results for a sample of banks from 10 transition countries of Eastern Europe for the period 1995-2003. JEL Classification: G21, D4, L31

Keywords: asymmetric information; banking; foreign entry; interest rate; mode of entry (search for similar items in EconPapers)
Date: 2006-07
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Citations: View citations in EconPapers (36)

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Related works:
Working Paper: Acquisition versus greenfield: The impact of the mode of foreign bank entry on information and bank lending rates (2007)
Working Paper: Acquisition versus greenfield: The impact of the mode of foreign bank entry on information and bank lending rates (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2006653

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