Being a Foreigner Among Domestic Banks: Asset or Liability?

36 Pages Posted: 5 Jan 2010

See all articles by Stijn Claessens

Stijn Claessens

Bank for International Settlements (BIS)

Neeltje van Horen

Bank of England; Centre for Economic Policy Research (CEPR)

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Date Written: December 2009

Abstract

Studying a large number of banks in various countries between 1999 and 2006, we document that foreign banks perform better when from a high income country, when host country competition is limited, and when they are large and rely more on deposits for funding. Foreign banks' performance improves over time, possibly as they adapt, and is better when the home country is geographical or cultural (but not institutional) close to the host country. These findings show the importance of controlling for heterogeneity among foreign banks and help reconcile some contradictory results found in the literature on foreign banks' performance.

Keywords: Bank soundness, Banking sector, Commercial banks, Cross country analysis, Foreign direct investment, International banking, Profit margins, Time series

Suggested Citation

Claessens, Stijn and van Horen, Neeltje, Being a Foreigner Among Domestic Banks: Asset or Liability? (December 2009). IMF Working Papers, Vol. , pp. 1-35, 2009. Available at SSRN: https://ssrn.com/abstract=1531506

Stijn Claessens (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Neeltje Van Horen

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

HOME PAGE: http://https://www.bankofengland.co.uk/research/Researchers/neeltje-van-horen

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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