Acquisition versus Greenfield: The Impact of the Mode of Foreign Bank Entry on Information and Bank Lending Rates
By Sophie Claeys, Christa Hainz. Social Science Research Network, 2007
154 citations recorded by the source corpus.
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.
Subfields: Finance
View Paper: https://www.semanticscholar.org/paper/9c33228d2db5f5682e8ccf357fc02efd8e402158
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
In Finance
Citations in the corpus
- Inherited or Earned? Performance of Foreign Banks in Central and Eastern Europe (2008, unknown): “More specifically, Claeys and Hainz (2007) note that competition on the banking market is stronger when a foreign bank enters via a greenfield investment than via the acquisition.”
- Are foreign banks more profitable than domestic banks? Home- and host-country effects of banking market structure, governance, and supervision (2011, background): “Claeys and Hainz (2006) conduct a theoretical analysis that showed foreign bank entry would drive down a country’s average interest rate for new loans.”
- Economic and strategic considerations surrounding Chinese FDI in the United States (2009, background): “In this regard, Claeys and Hainz (2006) study a sample of banks from ten transition countries of Eastern Europe and find supportive evidence for the inference that greenfield investments have stronger competitive effects than do foreign acquisitions.”