Asymmetric Information and the Mode of Entry In Foreign Credit Markets

Eric Van Tassel () and Sharmila Vishwasrao

No 6002, Working Papers from Department of Economics, College of Business, Florida Atlantic University

Abstract: In a newly liberalized credit market, foreign banks with cost advantages are likely to be less informed than domestic banks that hold information on credit risks. These relative advantages may generate incentives for a foreign bank to negotiate acquisition of a domestic bank in order to capture information endowments. However, if it is difficult to assess the value of information held by banks, the foreign bank will face important choices about the optimal mode of entry and what acquisition price to pay. These choices have implications for the survival of domestic banks and how capital is allocated after liberalization.

Keywords: Foreign entry; bank competition; information (search for similar items in EconPapers)
JEL-codes: D82 G21 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2006-08
New Economics Papers: this item is included in nep-ban, nep-com and nep-cse
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Citations: View citations in EconPapers (5)

Forthcoming in Journal of Banking and Finance

Downloads: (external link)
http://home.fau.edu/svishwas/web/Mode%20of%20bank%20entry.pdf First version, 2006 (application/pdf)

Related works:
Journal Article: Asymmetric information and the mode of entry in foreign credit markets (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:fal:wpaper:06002

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