 Are foreign banks more profitable than domestic banks? Home- and host-country effects of banking market structure, governance, and supervisionSheng-Hung Chen and Chien-Chang Liao Journal of Banking & Finance, 2011, vol. 35, issue 4, 819-839 Abstract: Using both bank- and country-level data on banking sectors from 70 countries over the period 1992-2006, this paper empirically investigates the joint home- and host-country effects of banking market structure, macroeconomic condition, governance, and changes in bank supervision on foreign bank margins. We find that foreign banks are more profitable than domestic banks when they operate in a host country whose banking sector is less competitive and when the parent bank in the home country is highly profitable. Moreover, when foreign banks operate in a host country with lower growth rates of GDP, higher interest and inflation rates, and more stringent regulatory compliance with Basel risk weights, their margins increase. Specifically, changes in bank supervision of a parent bank's ownership restrictiveness in the home country significantly increases foreign bank margins, while supervisory changes in regulatory compliance with Basel risk weights in the host country enhances foreign bank margins. Keywords: Bank; profitability; Foreign; bank; Banking; competition; Panzar; and; Rosse; H; Governance; Country; risk; Regulatory; supervision (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:35:y:2011:i:4:p:819-839 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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