Loyal Lenders or Fickle Financiers: Foreign Banks in Latin America

By Arturo J. Galindo, A. Micco, Andrew Powell. 2005

204 citations recorded by the source corpus.

We suggest that foreign banks may represent a trade-off for their developing country hosts. A portfolio model is developed to show that a more diversified international bank may be one of lower, overall risk and less susceptible to funding shocks but may react more to shocks that affect expected returns in a particular host country. Foreign banks have become particularly important in Latin America where we find strong support for these theoretical predictions using a dataset of individual Latin American banks in 11 countries. Moreover, we find no significant difference between the size of the response of foreign banks to a negative liquidity shock and a positive opportunity shock: in both cases the market share of foreign banks in credit increases.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/bb6bd31515587fb218c94e96879e6f0b665df2df

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Citations in the corpus

Endogenous Free Trade Agreements and the Multilateral Trading System (2005, background): “As Chang and Winters (2002) show forcefully, even trading blocs that are small in world markets can affect outsiders significantly.”
Trade Liberalization and Industry Wage Structure : Evidence from Brazil (2004, methodology): “These tariffs were obtained as in Chang and Winters (2002) by applying the negotiated tariff”
Do foreign banks increase competition? Evidence from emerging Asian and Latin American banking markets (2011, background): “3 For studies on the impact of foreign bank penetration during the post-crisis period in Latin America, see Dages et al. (2000), Crystal et al. (2002), Galindo et al. (2004), Martinez Peria and Mody (2004) and Yildirim and Philippatos (2007).”
Countries, regions and trade: On the welfare impacts of economic integration (2007, background): “As recently argued by Winters and Chang (2000) as well as Chang and Winters (2002), such effects seem to be crucial for measuring the impact and welfare consequences of trade liberalization.”