Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81886
Authors: 
Claeys, Sophie
Hainz, Christa
Year of Publication: 
2007
Series/Report no.: 
Sveriges Riksbank Working Paper Series 210
Abstract: 
Policy makers often decide to liberalize foreign bank entry but put limitations on the mode of entry. We study how different entry modes affect the lending rate set by foreign and domestic banks. Our model captures two essential features of banking competition in emerging markets: Domestic banks possess private information about their incumbent clients and foreign banks have better screening skills. Our model predicts that competition is stronger if foreign entry occurs through a greenfield investment and domestic banks' interest rates are thus lower. We find empirical support for this differential competition effect for a sample of banks from ten Eastern European countries for the period 1995-2003.
Subjects: 
Banking
Foreign Entry
Mode of Entry
Interest Rate
Asymmetric Information
JEL: 
G21
D4
L31
Document Type: 
Working Paper

Files in This Item:
File
Size
391.14 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.