Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212699 
Year of Publication: 
2011
Series/Report no.: 
BOFIT Discussion Papers No. 11/2011
Publisher: 
Bank of Finland, Institute for Economies in Transition (BOFIT), Helsinki
Abstract: 
This study investigates the impact of foreign bank penetration on firm entry in Central and Eastern Europe. Acquisition of domestic banks by foreign investors has lowered rates of firm creation, decreased the average size of entrants, and increased firm exit in industries with greater informational opacity, while entry of greenfield foreign banks appears to have spurred firm creation and exit. We modify the view in earlier studies that informational opacity equates with firm size, defining opacity in terms of technological characteristics for a given industry. We find the economic significance of foreign bank entry is larger for opaque industries than industries with large shares of small firms. The study provides evidence of increased credit constraints for start-ups in Central and Eastern Europe, which is consistent with the theoretical proposition that the presence of foreign banks exacerbates informational asymmetries.
Subjects: 
Entrepreneurship
Foreign bank entry
Asymmetric information
Credit constraints
JEL: 
E51
G21
M13
Persistent Identifier of the first edition: 
ISBN: 
978-952-462-706-1
Document Type: 
Working Paper

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