Bank lending and bank relationships in China: guanxi or commercial?

2017 ◽  
Vol 43 (4) ◽  
pp. 425-439 ◽  
Author(s):  
Wei Yin ◽  
Kent Matthews
Keyword(s):  
Transition Economy ◽  
Bank Lending ◽  
Foreign Bank ◽  
Foreign Banks ◽  
Relationship Banking ◽  
Content Type ◽  
Banking Market ◽  
Bank Ownership ◽  
Domestic Banks ◽  
Relationship Of

Purpose China as a main emerging and transition economy has since 2006 opened up its banking market to foreign competition. Thus far, the penetration of foreign banks has been only moderate with around 2 per cent market share of the total banking market, despite the widely held view that foreign banks operate at a higher level of efficiency and that Chinese state-owned banks (SOBs) operate at a lower level of efficiency. The purpose of this paper is to explore the relationship between bank ownership and the lending behaviour and relationship banking that stems from the Chinese tradition of “guanxi”. Design/methodology/approach Based on three bank types the authors construct a model of the choice of bank type and show how that model can be estimated using a multinomial logit. The authors assume that firms choose a bank type as a function of firm characteristics (Berger et al., 2008; Ongena and Sendeniz-Yüncü, 2011), deal terms (Machauer and Weber, 2000; Ziane, 2003), and industry classification (Uchida et al., 2008; Ongena and Sendeniz-Yüncü, 2011). Findings This paper finds the existence of a close banking relationship of a “guanxi” type between SOBs and state-owned enterprises (SOEs). This is shown up in the form of better deal terms for the SOE. In the case of foreign banks the authors find that a foreign bank-foreign owned enterprise relationship exists but this is based on risk quality and no advantages in deal terms, which suggest a more commercial-based relationship. The empirical findings are that transparent and high-quality firms are likely to engage with foreign banks, while state-owned firms are more likely to engage with SOBs. Originality/value In China, few studies have addressed the potentially important role of bank ownership on lending behaviour (e.g. Firth et al., 2008; Berger et al., 2009). The authors extend the analysis by distinguishing not only between foreign and domestic banks, but also between SOBs and other domestic banks. This research seeks to enhance the understanding of bank ownership, lending behaviour and relationship banking.

Do foreign banks in India respond to global monetary policy shocks? A SVAR analysis

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ameen Omar Shareef ◽  
K.P. Prabheesh
Keyword(s):  
Monetary Policy ◽  
Bank Lending ◽  
Foreign Bank ◽  
Foreign Banks ◽  
Monetary Policy Shocks ◽  
Content Type ◽  
Indian Economy ◽  
Policy Shocks ◽  
The Impact

Purpose This paper aims to examine the role of foreign banks in transmitting global monetary policy shocks to India. Further, the authors try to explore the international bank lending channel and analyze the impact of global monetary policy on Indian macroeconomic variables. Design/methodology/approach The authors use a structural break unit root test and structural vector autoregression on monthly data from 1998 to 2018. Findings The study finds that the global monetary policy is significantly determining foreign banks’ lending in India; the evidence of a portfolio re-balancing channel in the process of global monetary policy transmission to the Indian economy; the exchange rate is significantly explaining the foreign bank credit dynamism in India; and evidence of international monetary policy spillover to the Indian economy. Originality/value This is the first attempt to analyze the role of foreign banks in the transmission of global monetary policy shocks to India, where the literature availability is limited. The finding of ineffective domestic monetary policy on foreign bank lending opens the need for an in-depth and diversified analysis of the role of foreign banks in the transmission of domestic monetary policy.

Foreign banks in MENA countries: how important? How relevant?

2016 ◽  
Vol 32 (1) ◽  
pp. 77-98 ◽  
Author(s):  
Saibal Ghosh
Keyword(s):  
Positive Impact ◽  
Spillover Effects ◽  
Dynamic Panel Data ◽  
Foreign Bank ◽  
Foreign Banks ◽  
Bank Performance ◽  
Content Type ◽  
Mena Countries ◽  
Domestic Banks ◽  
The Impact

Purpose – The role of foreign banks in impacting the behavior of domestic banks has been a relatively unaddressed topic in the literature. Employing bank-wise data on MENA countries during 2000-2012, the purpose of this paper is to examine how the behavior of foreign banks impact domestic bank performance. For this purpose, the authors focus on not only their profitability and stability, but also on broader numbers such as loan portfolio and funding costs. In addition, the authors also explore the impact of foreign banks on the growth of domestic economies and its implications for the allocation of capital and labor. Design/methodology/approach – The authors employ the dynamic panel data methodology as compared to alternate techniques owing to the ability of this technique to effectively address the endogeneity problem of some of the independent variables. Findings – The results suggest that foreign bank presence exerts significant spillover effects. At the same time, increased foreign banks appear to impel domestic banks to cut back lending. As regards its impact on growth, the results indicate that although labor does not exert any discernible impact on GDP growth, capital exerts a positive impact on output when foreign bank penetration is high, supportive of the real effects of foreign banks. Originality/value – To the best of the authors’ knowledge, this is one of the early studies for MENA countries to examine this issue in a systematic manner. Most studies of this genre focus on a limited set of banks/countries, thereby limiting their empirical evidence. By focussing on an extended sample of MENA country banks covering an extended period that subsumes the financial crisis, the analysis is also able to shed light as to how foreign presence impacts domestic bank performance.

Foreign Banks in the Crisis

2017 ◽  
Author(s):  
Rachel A. Epstein
Keyword(s):  
Financial Crisis ◽  
Central Europe ◽  
Bank Lending ◽  
Foreign Ownership ◽  
Foreign Bank ◽  
Foreign Banks ◽  
Market Model ◽  
Unexpected Finding ◽  
East Central Europe ◽  
East Central

One reason governments have protected their banks from foreign ownership is that they feared foreign-owned banks would “cut and run”—i.e. abandon their host markets—in a financial crisis. An unexpected finding of this chapter, however, is that while foreign banks’ commitments to host markets have indeed been fleeting in crises, those commitments were weakest when the relationship between foreign banks and host markets was not characterized by ownership. Thus it was foreign ownership through a “second home market” model and bank subsidiaries during the acute phase of the US financial crisis (2008–9) that saved East Central Europe from economic catastrophe. In Western Europe, meanwhile, where foreign bank ownership levels were low but cross-border lending was significant, bank lending retreated behind national borders. This chapter also rejects the argument that the Vienna Initiative, a voluntary bank rollover agreement, compelled foreign-owned banks to maintain their exposures in East Central Europe.

Perceived overall service quality and customer satisfaction

2018 ◽  
Vol 36 (5) ◽  
pp. 908-930 ◽  
Author(s):  
Sedigheh Moghavvemi ◽  
Su Teng Lee ◽  
Siew Peng Lee
Keyword(s):  
Customer Satisfaction ◽  
Service Quality ◽  
Structural Equation ◽  
Internet Banking ◽  
Foreign Bank ◽  
Foreign Banks ◽  
Content Type ◽  
Innovative Products ◽  
Quality Dimensions ◽  
Service Quality Dimensions

Purpose Foreign and local banks in Malaysia are competing in terms of skilled staff, innovative products and services, rendering quality services and customer satisfaction. The purpose of this paper is to examine the overall service quality and customer satisfaction of both foreign and local banks. Design/methodology/approach The data used to test the hypothesis were collected from 748 foreign and local bank customers in Malaysia. The research model was analysed using a structural equation modelling technique. Findings Results show that knowledge and staff competencies, as well as convenience of the bank is more significant for local bank customers while bank image and internet banking are important components for foreign bank customers. The results also reveal that foreign bank customers have higher satisfaction as compared to local bank customers. Research limitations/implications No analysis is undertaken of any difference in the service quality dimensions between banks of different size. Further research on banking services could usefully test services quality dimensions across banks of different sizes. Practical implications The findings serve as a valuable reference for local banks understand service quality challenges they may face from foreign banks in this competitive industry. Findings suggest that, to provide high-quality services, financial institutions need to heighten customer satisfaction differentiation strategies. Originality/value The outcomes of this study enhance the knowledge on the performance of both local and foreign banks in Malaysia as well as customer satisfaction, which are invaluable to all bank managers and industry players in improving their services.

Brazil banks will stay cautious amid fragile recovery

2017 ◽  
Keyword(s):  
Private Sector ◽  
Banking Sector ◽  
Retail Banking ◽  
Foreign Bank ◽  
Foreign Banks ◽  
Risk Averse ◽  
Public And Private ◽  
Content Type ◽  
Private Banks ◽  
Public And Private Sector

Subject Outlook for the banking sector. Significance The two-year recession has made Brazil’s public- and private-sector banks increasingly risk-averse in their lending to households and companies. This is likely to persist in 2017, owing to a very uncertain and fragile economic recovery, high unemployment and elevated levels of private-sector debt. Impacts Less-aggressive lending by national state banks will help public finances and give private banks a chance to increase market share. Spanish Santander will be the only foreign bank capable of competing in Brazil’s retail banking segment in the coming years. Other foreign banks lacking the necessary scale for profitable retail banking will focus on other niches.

scholarly journals Determinants of loans and deposits strategies of foreign bank subsidiaries in emerging countries

2013 ◽  
Vol 3 (2) ◽  
pp. 29-45
Author(s):  
Mehdi Mili ◽  
Jean-Michel Sahut
Keyword(s):  
Bank Lending ◽  
Emerging Countries ◽  
Market Discipline ◽  
Foreign Bank ◽  
Path Model ◽  
Foreign Banks ◽  
Foreign Subsidiaries ◽  
Factors Affecting ◽  
Macroeconomic Variables ◽  
Financial Variables

Abstract. This paper focuses on the transmission of bank liquidity shocks in Loan and deposit in emerging markets. First, we attempt to identify factors affecting the credit strategy of foreign banks in emerging countries. Second, we test whether depositors exert market discipline on foreign subsidiaries. By combining financial variables of subsidiaries and their parent banks and macroeconomic variables of host and home countries, we investigate the factors that may affect the behavior of depositors. Our empirical approach is based on a Partial Least Squares-Path model that allows us to indentify the causal relationships between the various groups of variables. Our results show that foreign bank lending is determined by the specific financial variables of the parent bank and macroeconomic variables of the country of origin. This support that the strategy's credit of foreign subsidiary is centrally managed at the parent bank and credit supply of subsidiaries depends primary on the financial situation of its parent bank. Finally we find evidence of market discipline exercised over foreign subsidiaries in emerging countries. We show that market discipline is strongly affected by the specific characteristics of the subsidiary.

scholarly journals Cross-border banking and foreign branch regulation in Europe

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Lucia Gibilaro ◽  
Gianluca Mattarocci
Keyword(s):  
Banking Sector ◽  
Foreign Bank ◽  
Capital Adequacy ◽  
Foreign Banks ◽  
European Economic Area ◽  
The European Union ◽  
Content Type ◽  
Cross Border ◽  
European Banking

Purpose This paper aims to examine the relevance of cross-border activity in the European banking sector, evaluating the role of differences in regulation to explain the level of interest in entering foreign markets. Design/methodology/approach The sample considers all banks in the European Union (EU 28) existing at year-end 2017, and information about the ultimate owners’ nationality to classify local and foreign banks is collected. The analysis provides a mapping of regulatory restrictions for foreign banks and evaluates how they impact the role of foreign players in the deposit and lending markets. Findings Results show that the lower are the capital adequacy requirements, the higher are the amounts of loans and deposits offered by non-European Economic Area banks and, additionally, the higher the probability of having a foreign bank operating in the country. Originality/value This paper provides new evidence on regulatory arbitrage opportunities in the EU and outlines differences among EU countries not previously studied.

scholarly journals Foreign bank entry impacted domestic-owned banks in Ghana from 1975 to 2008

2013 ◽  
Vol 2 (4) ◽  
pp. 40-53
Author(s):  
Nsiah Acheampong
Keyword(s):  
Financial Performance ◽  
Commercial Banks ◽  
Foreign Bank ◽  
Foreign Banks ◽  
Return On Assets ◽  
Foreign Bank Entry ◽  
Domestic Banks ◽  
Bank Entry

This article empirically examines the effects of foreign bank entry on the financial performance of Merchant Bank Ghana Limited and Ghana Commercial Banks Limited in Ghana from 1975 to 2008. The main result of the pooled regression was that foreign bank entry relatively increased domestic banks’ return on assets for the period 1992-2008; a period with a high influx of foreign banks into Ghana. This result supported the studies by Beck, Demirguc-Kunt, and Levine (2006) and Boldrin and Levine (2009) that found that foreign bank entry enhanced domestic banks profitability margins. The presence of foreign-owned banks was not detrimental to the financial performance of the domestic-owned banks in Ghana.

scholarly journals The Analysis of Corporate Governance on Non-Performing Loans: Evidence from Indonesia

2021 ◽  
Vol 1 (1) ◽  
pp. 1-23
Author(s):  
Jovita Ramadhanti ◽  
Ivan Destian Butar Butar ◽  
Christian Haposan Pangaribuan
Keyword(s):  
Corporate Governance ◽  
Banking Sector ◽  
Stock Exchange ◽  
Foreign Bank ◽  
Board Independence ◽  
Regression Result ◽  
Board Size ◽  
Bank Ownership ◽  
Domestic Banks ◽  
The Impact

Objective – This study aims to know the impact of corporate governance mechanisms on the non-performing loan of a bank. This study also aims to analyze which corporate governance aspects are significant to the banks’ non-performing loans in Indonesia. Another objective of this study is to examine whether the relationship between corporate governance and non performing loan depends on bank ownership. This study’s corporate governance variables are the board size, board independence, and bank ownership category. This study focuses on the non-performing loan of the banks in Indonesia. Methodology – This study will examine 26 banks in Indonesia listed on the Indonesian Stock Exchange (IDX). It includes both foreign-owned (foreign bank) and domestic banks. The length of the period of observation is seven years, from 2012 to 2018. Panel data of these banks are analyzed using the fixed-effect regression. Findings – The regression result shows that board size and bank ownership category have no significant impact on the non-performing loan, while the board independence impacts non-performing loans negatively. Novelty – This study contributes to the academic literature, specifically on the issue of corporate governance in the banking sector. This study’s result and findings could be used as the reference for other studies and further research on the corporate governance issue. This study will also expand the literature about corporate governance in the Indonesian banking sector since there are still a limited number of studies that discussed this specific matter.

scholarly journals Local and international dimensions of credit provision by commercial banks in Kenya

2017 ◽  
Vol 12 (3) ◽  
pp. 87-99
Author(s):  
Roseline Misati ◽  
Anne Kamau
Keyword(s):  
Interest Rates ◽  
Commercial Bank ◽  
Home Ownership ◽  
Bank Lending ◽  
Bank Loans ◽  
Foreign Banks ◽  
Interest Rate Spread ◽  
Bank Ownership ◽  
Main Determinants

Although considerable research has focused on the determinants of credit to the private sector, the issue still remains controversial, particularly with respect to the role of foreign banks in emerging markets. This study sought to understand the factors that affect lending of commercial bank loans both in form of foreign and local loans. It used panel data methods on quarterly bank-specific data covering the period from 2000 to 2013. In general, the results reveal that the ownership structure, housing variable and the size of the bank are the main determinants of aggregate commercial bank lending. This conclusion is maintained even when the determinants of foreign loans and local loans are specifically examined separately. However, the role of the liquidity measure is in not consistent in the different specifications while the role of interest rates is largely in line with expectation in most of the specifications. Implicitly, the results seem to suggest a need for mergers of small banks, policy focus on incentives for more local bank ownership and continued efforts on minimization of interest rate spread, which not only promote mortgage financing and home ownership, but also overall credit growth.

Sign in / Sign up

Export Citation Format

Share Document