Institutional development and foreign banks in Chile

Abstract

This paper analyzes the effects of foreign banks on developing countries' bank performance. We study this relationship from a different perspective by focusing on Chile, an emerging market with strong institutions. The results from dynamic panel regressions on hand-collected financial statement data from 2005 to 2014 indicate that foreign banks improve banking sector competitiveness, reduce the volatility of returns, and increase commercial and consumption loans. The overall evidence suggests that, in the presence of solid institutions, foreign banks improve the banking sector in developing countries. Therefore, public policies on foreign banks should be more effective when accompanied by advances in institutions.

The impact of cross-border acquisitions on target banks’ performance in an institutionally poor environment: Ukraine’s takeover wave

“…A key take-away message from our analysis would thus appear to be that high-quality institutions and a strong rule of law are preconditions for globalization of the home banking market to be successful. Note in this respect that Du et al (2018) find that in Chile, an emerging market with strong institutions, foreign banks improved the banking system by increasing the competitiveness of the sector, stabilizing returns, and increasing lending.…”

“…For a detailed discussion of this point, please see the working paper version of the present paper (available from the authors). Du et al (2018) would seem to share this opinion 8 , that the main benefit of cross-country studiestheir ability to explore the impact of country-level variablesis counterbalanced by the difficulty of controlling for the complex cross-country heterogeneity in terms of technological, institutional, and economic factors. Caiazza et al (2012), for instance, find that the sensitivity of the regulatory system to risk taking by banks is an important determinant of takeovers.…”

Institutions: Key variable for economic development in Latin America

“…Davis and Hopkins (2011) argue that the key omitted variable in the unresolved research on the effect of inequality on long-run economic growth is the quality of economic institutions. Du et al (2017) show that, in the presence of solid institutions, foreign banks improve the banking sector in developing countries. Another example is Blanco (2013), who examines the impact of financial development on Latin American economic growth.…”

Fracturas en gobiernos extractivistas: el caso de Chile y Bolivia

“…Estos son el Impuesto a la Renta de Primera Categoría, que aplica para todas las empresas; el Impuesto Adicional sobre las empresas que realizan remesas al exterior; y un Impuesto Específico a la actividad minera, llamado "Royalty a la minería", el cual consiste en una tasa por la explotación de minerales en el país (Rodriguez et al, 2015). Estos impuestos, los fondos se financian con las utilidades obtenidas por CODELCO (Du, Serrano & Vianna, 2018).…”

“…No obstante, fue necesario romper con la regla fiscal de superávit estructural e incrementar el stock de deuda pública con el objetivo de reactivar la economía (Agosin & Montecinos, 2011). El problema que surgió a partir de 2014 es que, al no retomar la política fiscal anticíclica anterior, el resultado fiscal comenzó a deteriorarse, generando presiones sobre el tipo de cambio real (Cordeno & Villena, 2020;Du, Serrano & Vianna, 2018).…”