Foreign Bank Entry: Experience, Implications for Developing Countries, and Agenda for Further Research

Abstract

Foreign banks are playing an increasingly large role in many developing countries, Experience, Implications for holding more than 50 Developing Countries, and percent of banking assets in Agenda for Further Research several of these countries. But important issues about foreign bank entry continue

Finance and Inequality: Exploring Pro-Poor Investment Channels in Africa

“…The cases of Chile in the 1970s (Velasco, 1988;Valdes-Prieto,1992), Mexico in the 1980s (Haber & Kantor, 2004;La Porta et al,2003;Haber et al,2003) and Russia in the 1990s ( Claessens & Pohl,1995;Perotti, 2002) attest how privatization of state owned banks benefits groups of insiders. We also find evidence of preferential allocation of licenses to a few insiders (Clarke et al,2003), profits of stock market liberalization that have been directed only to the top quintile of the income distribution (Das and Mohapatra,2003), listing and corporate governance rules often designed to help insiders (Khwaja & Mian, 2005) and lastly, evidence suggesting that poor regulation and weak enforcement in the liberalization markets allowed insiders ample space for the expropriation of minority shareholders (La Porta et al,2000;Claessens et al,2002). In this strand 8 we also find evidence that, while financial openness generally improves capital allocation and investment at the micro level (Henry,2003),it does not always translate into higher economic growth at the aggregate level.…”

Inequality, Finance and Pro-Poor Investment in Africa

“…Notable country-specific examples documenting how the privatization of state-owned banks benefits groups of insiders include: Chile in the 1970s (see Velasco, 1988;Valdes-Prieto, 1992); Mexico in the 1980s (see Haber & Kantor, 2004;La Porta et al, 2003;Haber et al, 2003) and Russia in the 1990s (see Claessens & Pohl, 1995;Perotti, 2002). Other findings supporting this narrative include: preferential allocation of licenses to a selected few insiders (Clarke et al, 2003); benefits from stock market liberalization skewed to the top quantile of the income distribution (Das & Mohapatra, 2003); corporate governance rules designed to profit insiders (Khwaja & Mian, 2005); poor regulation and weak enforcement of rules in liberalized markets avail insiders with room for expropriating minority shareholders (La Porta et al, 2000;Claessens et al, 2002) and financial openness increasing investment and capital allocation at the micro level (see Henry, 2003) without a corresponding translation into higher economic growth at the macro level.…”

Financial Development and Economic Growth: The Role of Foreign-Owned Banks in CESEE Countries

“…According to one view, foreign banks promote competition and efficiency in the host country, bring positive spill-over effects from best risk management and governance practices and introduce product and service innovations [37,40,[56][57][58][59][60]. To the extent that these innovations can alleviate credit-market inefficiencies, relax external financing constraints on firm activities and stimulate industrial growth, foreign lending can significantly improve growth prospects in host countries [47].…”