Arbeitspapier

Acquisition versus greenfield: The impact of the mode of foreign bank entry on information and bank lending rates

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.

Language
Englisch

Bibliographic citation
Series: Sveriges Riksbank Working Paper Series ; No. 210

Classification
Wirtschaft
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Nonprofit Institutions; NGOs; Social Entrepreneurship
Subject
Banking
Foreign Entry
Mode of Entry
Interest Rate
Asymmetric Information
Finanzmarktregulierung
Internationale Bank
Markteintritt
Bankenregulierung
Zins
Theorie
EU-Staaten (Osteuropa)

Event
Geistige Schöpfung
(who)
Claeys, Sophie
Hainz, Christa
Event
Veröffentlichung
(who)
Sveriges Riksbank
(where)
Stockholm
(when)
2007

Handle
Last update
10.03.2025, 11:44 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Claeys, Sophie
  • Hainz, Christa
  • Sveriges Riksbank

Time of origin

  • 2007

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