Date of Award

4-2012

Degree Name

Doctor of Philosophy

Department

Economics

First Advisor

Dr. Susan Pozo

Second Advisor

Dr. Debasri Mukherjee

Third Advisor

Dr. Patrik Hultberg

Keywords

Foreign banks, international lending, financial crisis, international migration, financial FDI, bank performance

Abstract

Without question, global financial integration has accelerated in the last two decades. This acceleration is due, in part, to the opening of developing countries' financial markets to foreign banks, prompting many changes to financial systems in developing countries. This dissertation consists of three essays focusing on the impacts and the determinants of international banks' participation in the financial markets of developing countries.

The first essay investigates whether banks with foreign owners are more willing to provide loans in the host country possibly contributing toward greater financial stability for that country. Specifically, I test whether foreign banks' lending behavior is different from domestic banks' behavior. Using a panel dataset with 1,643 commercial banks in 35 Asian and Latin American countries from 2000 to 2008, estimation reveals that foreign banks have not been more generous with respect to extending loans relative to domestic banks. Additionally, when grouping foreign banks by their geographic origins, a home region preference is found. International banks appear more likely to extend loans in markets located in their geographic region relative to markets in other areas of the globe.

The second essay questions whether foreign ownership positively impacts bank performance. In addition I seek to understand which host characteristics affect bank performance. Bank-level data for 1600 commercial banks from 2000 through 2008 are used in estimation. Results suggest host countries' characteristics do affect the relative performance of foreign banks. while foreign ownership does not positively impact bank performance, foreign banks tend to outperform domestic banks in countries that are relatively closed and less competitive. Also, foreign banks do perform differently depending on their geographic origin.

The third essay examines the impact of host characteristics and economic linkages on foreign bank entry into 20 Asian and Latin American countries. Of particular note is whether international migration from the bank host country to bank origin country influences foreign bank entry due to the networks it promotes. Using panel Tobit estimation, this study finds that international migration from developing to industrialized economies significantly promotes foreign bank presence in developing nations.

Access Setting

Dissertation-Open Access

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