Being a foreigner among domestic banks: Asset or liability?

Stijn Claessens () and Neeltje Van Horen ()

Journal of Banking & Finance, 2012, vol. 36, issue 5, 1276-1290

Abstract: Do foreign banks perform better than domestic banks? The existing literature has come up with different answers, in part as data coverage has varied and often been limited. Studying the performance of foreign relative to domestic banks in many countries between 1999 and 2006, we find that the answer importantly depends on a number of factors. Specifically, foreign banks tend to perform better when from a high income country and when regulation in the host country is relatively weak. They also perform better when larger and having a bigger market share. Foreign banks from home countries with the same language and similar regulation as the host country also perform better. Geographical closeness, however, does not improve performance. These findings show that it is important to control for heterogeneity among foreign banks when studying their performance and help reconcile some contradictory results found in the literature.

Keywords: Foreign direct investment; International banking; Performance (search for similar items in EconPapers)
JEL-codes: F21 F23 G21 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42)

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Related works:
Working Paper: Being a Foreigner Among Domestic Banks: Asset or Liability? (2009)
Working Paper: Being a foreigner among domestic banks: Asset or liability? (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:36:y:2012:i:5:p:1276-1290

DOI: 10.1016/j.jbankfin.2011.11.020

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