Foreign Banks in Poor Countries: Theory and Evidence

Enrica Detragiache (), Thierry Tressel () and Poonam Gupta

Journal of Finance, 2008, vol. 63, issue 5, 2123-2160

Abstract: We study how foreign bank penetration affects financial sector development in poor countries. A theoretical model shows that when domestic banks are better than foreign banks at monitoring soft information customers, foreign bank entry may hurt these customers and worsen welfare. The model also predicts that credit to the private sector should be lower in countries with more foreign bank penetration, and that foreign banks should have a less risky loan portfolio. In the empirical section, we test these predictions for a sample of lower income countries and find support for the theoretical model.

Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (309)

Downloads: (external link)
https://doi.org/10.1111/j.1540-6261.2008.01392.x

Related works:
Working Paper: Foreign Banks in Poor Countries: Theory and Evidence (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:63:y:2008:i:5:p:2123-2160

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().