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N° 2008-15 |
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| September 2008 |
| The Effect of Foreign Bank Entry on the Cost of Credit in Transition Economies. Which Borrowers Benefit the Most? |
Hans Degryse
Olena Havrylchyk
Emilia Jurzyk
Sylwester Kozak |
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| We employ a unique dataset to study the impact of foreign bank ownership and mode of entry
on banks’ lending rates to transparent and opaque borrowers. We find that greenfield banks
charge lower lending rates on average and we test for two hypotheses that can explain the
lower cost of credit of these institutions: (1) superior performance or (2) different portfolio
composition with a focus on more transparent borrowers. Our analysis shows that bank ownership
and mode of entry have a large impact on banks’ portfolio composition in terms of
borrowers, maturity, and currency. After controlling for these differences, we do not find any
impact of foreign bank ownership and mode of entry on lending rates, which is in line with
the "portfolio composition hypothesis". |
Non-technical summary |
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Résumé
non-technique
en français |
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| Full text |
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| Banks; ownership; loan pricing |
Keywords |
| G21; G28; G34; L11 |
JEL classification |
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