How Foreign Participation and Market Concentration Impact Bank Spreads: Evidence from Latin America

By Maria Martinez Peria, A. Mody. 2004

454 citations recorded by the source corpus.

Increasing foreign participation and high concentration levels characterize the recent evolution of banking sectors' market structures in developing countries. We analyze the impact of these factors on Latin American bank spreads during the late 1990s. Our results suggest that foreign banks were able to charge lower spreads relative to domestic banks. This was more so for de novo foreign banks than for those that entered through acquisitions.The overall level of foreign bank participation seemed to influence spreads indirectly, primarily through its effect on administrative costs. Bank concentration was positively and directly related to both higher spreads and costs.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/e3cee5d669f7919786381231181acc2540f9fc14

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Citations in the corpus

How Banks go Abroad: Branches or Subsidiaries? (2005, background): “For example, Claessens et al. (2000), Barajas et al. (2000), Denizer (2000), and Martínez Pería and Mody (2004) study the effects on competition and efficiency in the banking sector.”
A more complete conceptual framework for SME finance (2006, background): “However, in developing nations, foreign-owned banks usually appear to be more profitable and efficient than domestically-owned banks on average (e.g., Claessens, Demirguc-Kunt, and Huizinga 2001, Martinez Peria and Mody 2004), although one”
The mix of international banks' foreign claims: Determinants and implications (2005, background): “and Martínez Pería and Mody (2004) discuss the implications on competition and efficiency in the banking sector.”
Determinants of Net Interest Margins of Commercial Banks in Kenya: A Panel Study (2012, background): “This is because banks bearing higher average operating expenses may resort to charge higher margins to offset higher operating costs (Maudos and Fernández de Guevara, 2004; Martinez Peria and Mody, 2004).”
The determinants of net interest income in the Mexican banking system: an integrated model (2009, background): “On the one hand, some studies show that margins are pro-cycle (Drakos, 2002; Claeys and Vander Vennet, 2007), while in others the margin is counter-cycle (Martínez and Mody, 2004; Gelos, 2006; Carbó and Rodríguez, 2007; Claeys and Vander Vennet, 2007).”
Bank ownership type and banking relationships (2006, unknown): “E-mail addresses: aberger@frb.gov (A.N. Berger), lklapper@worldbank.org (L.F. Klapper), mmartinezperia@worldbank.org (M.S. Martinez Peria), rz213@hermes.cam.ac.uk (R. Zaidi).”