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Will Strangers Help you Enter? The Effect of Foreign Bank Presence on New Firm Entry

Theodora Bermpei (), Antonios Nikolaos Kalyvas (), Lorenzo Neri () and Antonella Russo ()
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Theodora Bermpei: University of Nottingham Trent
Antonios Nikolaos Kalyvas: University of Greenwich
Lorenzo Neri: University of Greenwich
Antonella Russo: University of Greenwich

Journal of Financial Services Research, 2019, vol. 56, issue 1, 1-38

Abstract: Abstract We examine the effect of foreign bank presence on new firm entry in 83 economies over the 2005–2013 period. The empirical findings show that foreign bank presence exerts a positive and significant effect on firm entry. This effect subsides in countries with strong creditor rights, while it strengthens in economies with high depth of credit information sharing. In further analysis, we find that the type of credit information sharing provider matters. The positive effect of foreign bank presence on firm entry strengthens in the presence of a private credit bureau, whereas it is subdued in the presence of a public credit registry. Finally, we find some evidence that cultural and information sharing distance between home and host economies weakens the positive effect of foreign bank presence on firm entry. In terms of policy, attracting foreign banks while strengthening credit information sharing through private credit bureaus could benefit entrepreneurship in host economies.

Keywords: Foreign banks; Firm entry; Creditor rights; Information sharing (search for similar items in EconPapers)
JEL-codes: G21 F23 L26 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:kap:jfsres:v:56:y:2019:i:1:d:10.1007_s10693-017-0286-1