Does Foreign Bank Penetration Affect the Risk of Domestic Banks? Evidence from Emerging Economies

42 Pages Posted: 17 Jan 2017

See all articles by Minghua Chen

Minghua Chen

Southwestern University of Finance and Economics - Research Institute of Economics and Management

Ji Wu

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

Bang Nam Jeon

Drexel University - Department of Economics & International Business; Drexel University-School of Economics

Rui Wang

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

Multiple version iconThere are 2 versions of this paper

Date Written: January 16, 2017

Abstract

We investigate whether foreign bank penetration affects the risk-taking of domestic banks in emerging economies. By using bank-level data from 35 markets during the period of 2000-2014, we find significant evidence that the riskiness of domestic banks increases with the presence of foreign banks, and this finding is shown to be consistent in a series of robustness examinations. We also explore various conditions for the heterogeneity of the nexus between foreign bank penetration and domestic banks’ risk-taking, including: (1) what types of domestic banks are affected more by the presence of foreign banks, and (2) what patterns of foreign penetration exert more pronounced impact.

Keywords: Foreign bank penetration, bank risk-taking, emerging economies

JEL Classification: G21, G15, F36, E44

Suggested Citation

Chen, Minghua and Wu, Ji and Jeon, Bang Nam and Wang, Rui, Does Foreign Bank Penetration Affect the Risk of Domestic Banks? Evidence from Emerging Economies (January 16, 2017). Asian Finance Association (AsianFA) 2017 Conference, Available at SSRN: https://ssrn.com/abstract=2900612 or http://dx.doi.org/10.2139/ssrn.2900612

Minghua Chen

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

Gezhi Building 1201
555 Liutai Revenue, Wenjiang District
Chengdu, Sichuan 610074
China

Ji Wu

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

Bang Nam Jeon (Contact Author)

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

3141 Chestnut St.
Philadelphia, PA 19104
United States

Drexel University-School of Economics ( email )

3141 Chestnut St.
Philadelphia, PA 19104
United States

Rui Wang

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

55 Guanghuacun Street
Chengdu, Sichuan 610074
China

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