The Real Effect of Foreign Banks*

Bruno, Valentina; Hauswald, Robert

doi:10.1093/rof/rft041

Cited by 98 publications

(60 citation statements)

References 45 publications

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“…The coefficient of the interaction term between the amount of foreign assets over GDP and industries' external dependence is slightly above 0.1 and is statistically highly significant (see the first regression column in Table 7). This is in line with previous studies, which found that foreign bank presence has a positive growth effect (see, e. g., Bruno and Hauswald, 2014;Giannetti and Ongena, 2012). 16 15 The variable Credit inflow will be described in Section 6 analyzing cross-border lending.…”

Section: Banking Sector Integration Over the Cyclesupporting

confidence: 93%

“…The evidence for growth effects of banking sector integration is stronger. Studying growth on the industry level, Bruno and Hauswald (2014) find an overall positive growth effect of a higher share of foreign banks. Beck, Demirgüç-Kunt, and Maksimovic (2004) argue that a higher share 2 A stabilizing effect can also be found by formal commitment, shown by de Haas, Korniyenko, Pivovarsky, and Loukoianova (2012).…”

Section: Mario Draghi (2014)mentioning

confidence: 96%

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Financial Fragmentation and Economic Growth in Europe

Schnabel

Seckinger

2015

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may www.econstor.eu Financial Fragmentation and Economic Growth in Europe AbstractUsing industry data from Eurostat and applying the Rajan-Zingales methodology, we investigate the real growth effects of banking sector integration in the European Union. Our sample stretches from 2000 until 2012 and includes the phase of rapid financial integration before the crisis as well as the following phase of financial fragmentation and bank deleveraging. We find evidence that banking sector integration had a more than four times stronger growth effect during the crisis than in normal times. Growth effects are also stronger in times of domestic bank deleveraging. We conclude that concerns of European policy makers about fragmentation in the European banking sector are justified and that future reintegration is an important building block of future growth perspectives in the European Union.

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Section: Banking Sector Integration Over the Cyclesupporting

confidence: 93%

Section: Mario Draghi (2014)mentioning

confidence: 96%

Financial Fragmentation and Economic Growth in Europe

Schnabel

Seckinger

2015

SSRN Journal

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“…They also provide an explanation for results in Bruno and Hauswald (2014) and Claessens and van Horen (2014) who show that foreign bank entry has a positive effect in countries with more efficient credit information sharing systems and creditor rights protection, consistent with theoretical predictions in Sengupta (2007) and Gormley (2014).…”

Section: Introductionsupporting

confidence: 82%

“…Results in Panel C indicated that failing to account for time since entry or since becoming foreign owned, may confound comparisons between branches and subsidiaries. In Panel C we 44 See, among others, Bruno and Hauswald (2014), Claessens and van Horen (2014), Giannetti and Yafeh (2012), Gormley (2014), andMian (2006). 45 The literature also suggests that branches and subsidiaries follow different business models.…”

Section: What Drives Distance-related Information Constraints?mentioning

confidence: 99%

Foreigners vs. Natives: Bank Lending Technologies and Loan Pricing

2018

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This is the accepted version of the paper.This version of the publication may differ from the final published version. Permanent repository link AbstractCan distance-related information asymmetries in credit markets be overcome with contract design and credit scoring models? To answer this question, we explore differences in foreign and domestic banks' credit contract terms and pricing models. Using a sample of firms that borrow from both domestic and foreign banks in the same month, we show that foreign banks are more likely to demand collateral and grant shorter maturity loans than domestic banks. Foreign banks also base their pricing on internal credit ratings and collateral pledges, while domestic banks price according to the length, depth and breadth of their relationship with a firm. These findings confirm that foreign banks can overcome informational disadvantages using contract design and credit scoring models. However, we also show that there are limitations, with foreign banks facing higher default rates and lower returns on lending if not using collateral and short maturity as disciplining tools.

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“…For example, if  = 0.48 and  * = 0.50 (which would imply breakeven lending rates on large, screened loans from domestic and foreign lenders of 15% and 14.5%, respectively), foreign entry will cause a shift from a pooling equilibrium to a separating equilibrium, and net output will decline by 20%. 14 …”

Section: Equilibrium After Entrymentioning

confidence: 99%

Costly information, entry, and credit access

Gormley¹

2014

Journal of Economic Theory

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The Real Effect of Foreign Banks*

Cited by 98 publications

References 45 publications

Financial Fragmentation and Economic Growth in Europe

Financial Fragmentation and Economic Growth in Europe

Foreigners vs. Natives: Bank Lending Technologies and Loan Pricing

Costly information, entry, and credit access

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