Meng-Fen Hsieh

Factors influencing the foreign entry mode of Asian and Latin-American banks

The majority of past studies on the foreign market mode of entry have focused on manufacturing industries. Although some studies have explored the entry mode decisions of the banking industry, most of them have adopted the case study method, and systematic studies have been relatively few. This study intends to fill this gap through an investigation of 7041 Asian and Latin-American bank branches covering the period from 1999 to 2005. The analytical results demonstrate that both Asian and Latin-American banks are market seekers. However, Latin-American banks are not customer followers. In addition, the larger the scale of the bank or the greater the net interest margin the more likely it is that high-control entry modes will be adopted. In contrast, in countries in Asia with a greater cultural distance, banks tend to establish low-control entry modes to avoid uncertainty. However, this does not apply in the case of Latin America.

How Does Foreign Bank Ownership in the Banking Sector Affect Domestic Bank Behaviour? A Dynamic Panel Data Analysis

The purpose of this paper is to investigate how foreign bank ownership in the banking sector affects domestic bank behaviour and whether this relationship depends on the economic and financial conditions of the host country. This paper contains 795 individual banks in 39 countries covering the period 1999–2006. Foreign ownership is calculated using bank level data as a proxy for the degree of foreign bank ownership in the banking sector. First, we find that foreign bank ownership is associated with a decrease in both the profitability and overhead expenses of the domestic bank after applying the system panel Generalized Method of Moments model. Second, a lower level of economic development of the host country enhances the positive effects of foreign bank ownership on the income, profit and cost of domestic banks. Third, financial development plays an important role in determining the effect of foreign bank ownership. Fourth, while the use of aggregate foreign ownership data may provide us with a big picture, it may not explain why individual banks in the same country perform differently, which this study will answer.

Business cycles and bank regulations - what happens to bank provisioning? A more comprehensive look at 49 countries

Numerous researchers provide evidence that many banks intend to increase their Loan Loss Provisioning (LLP) when the economy is in a downward trend. However, the answer whether banks provide sufficient provisions when the economy is in an upturn trend remains unsolved. Furthermore, provisioning must be influenced not only by business cycles and bank earnings, but also by the regulatory system. Nevertheless, empirical research on this issue has been scarce. Thus, this study intends to answer two questions shown above. The evidence shows that with steady growth in both the economy and bank earnings, the bank management will tend to increase LLP, whereas with a buoyant economy but negative growth in bank earnings, the management will exhibit an inclination to reduce LLP. As regards the influence of bank regulation on provisions, the evidence shows that, under certain circumstances, banks make more provision based on regulatory considerations. This explains why bank regulations regarding LLP across countries do have an impact on banks’ provisioning behaviour.