Acquisition versus greenfield: The impact of the mode of foreign bank entry on information and bank lending rates

Sophie Claeys and Christa Hainz

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: Policy makers often decide to liberalize foreign bank entry but at the same time restrict the mode of entry. We study how different entry modes affect the interest rate for loans in a model in which domestic banks possess private information about their incumbent clients but foreign banks have better screening skills. Our model predicts that competition is stronger if market entry occurs through a greenfield investment and therefore domestic banks' interest rates are lower. We find empirical support for our results for a sample of banks from ten Eastern European countries for the period 1995-2003.

Keywords: banking; foreign entry; mode of entry; interest rate; asymmetric information (search for similar items in EconPapers)
JEL-codes: D4 G21 L31 (search for similar items in EconPapers)
Date: 2006-11
New Economics Papers: this item is included in nep-ban, nep-com, nep-ind and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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Related works:
Working Paper: Acquisition versus greenfield: The impact of the mode of foreign bank entry on information and bank lending rates (2007)
Working Paper: Acquisition versus greenfield: the impact of the mode of foreign bank entry on information and bank lending rates (2006)
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