Do Foreign Banks Take More Risk? Evidence from Emerging Economies

50 Pages Posted: 12 Mar 2016

See all articles by Bang Nam Jeon

Bang Nam Jeon

Drexel University - Department of Economics & International Business

Ji Wu

Southwestern University of Finance and Economics (SWUFE) - Research Institute of Economics & Management; Pennsylvania State University Harrisburg

Minghua Chen

Southwestern University of Finance and Economics (SWUFE) - Research Institute of Economics & Management

Rui Wang

Southwestern University of Finance and Economics (SWUFE) - Research Institute of Economics & Management

Date Written: March 2016

Abstract

This paper addresses the impact of foreign ownership on banks’ risk-taking behavior. Using the bank-level panel data of more than 1,300 commercial banks in 32 emerging economies during 2000-2013, we find that foreign owned banks take on more risk than their domestic counterparts. We further examine the factors that may contribute to foreign banks’ differentiated riskiness from several perspectives, namely, foreign banks’ informational disadvantages, agency problems, the contagion effect of parent banks’ financial conditions and the disparity between home and host markets, and find supportive evidence that these factors play a significant role in affecting foreign banks’ risk-taking.

Keywords: Foreign banks; Bank risk-taking; Emerging economies

JEL Classification: G21; G15; F65

Suggested Citation

Jeon, Bang Nam and Wu, Ji and Chen, Minghua and Wang, Rui, Do Foreign Banks Take More Risk? Evidence from Emerging Economies (March 2016). Available at SSRN: https://ssrn.com/abstract=2746472 or http://dx.doi.org/10.2139/ssrn.2746472

Bang Nam Jeon

Drexel University - Department of Economics & International Business ( email )

3141 Chestnut St.
Philadelphia, PA 19104
United States

Ji Wu (Contact Author)

Southwestern University of Finance and Economics (SWUFE) - Research Institute of Economics & Management ( email )

55 Guanghuacun St
Chengdu, Sichuan 610074
China

Pennsylvania State University Harrisburg ( email )

777 West Harrisburg Pike
Middletown, PA 17057
United States

Minghua Chen

Southwestern University of Finance and Economics (SWUFE) - Research Institute of Economics & Management ( email )

55 Guanghuacun Street
Chengdu, Sichuan 610074
China

Rui Wang

Southwestern University of Finance and Economics (SWUFE) - Research Institute of Economics & Management ( email )

55 Guanghuacun Street
Chengdu, Sichuan 610074
China

Register to save articles to
your library

Register

Paper statistics

Downloads
186
Abstract Views
876
rank
162,209
PlumX Metrics