IDEAS home Printed from https://ideas.repec.org/a/eee/riibaf/v56y2021ics0275531920309582.html
   My bibliography  Save this article

Do foreign ownership and home-host country distance matter? Evidence on the impact of bank market power on liquidity creation in a selected Southeast Asian country

Author

Listed:
  • Toh, Moau Yong
  • Jia, Dekui

Abstract

This paper examines the roles of foreign ownership and home-host country distance in the impact of bank market power on bank liquidity creation in a selected Southeast Asian country (Malaysia) over the period 2001−2017. A key finding is that the impact of market power on liquidity creation is either significantly negative or insignificant for domestic banks, but is significantly positive for foreign banks, irrespective of the liquidity creation measures used. This finding points to evidence of “home-field advantage” of domestic banks as the banks possess greater ability to withstand interest margin compression, while competing with foreign banks in liquidity creation market. Moreover, this paper finds that foreign banks originated from countries with cultural, economic and institutional distance to the host country require greater market power to boost their liquidity creation performance, as compared to their domestic counterparts. Further analysis also indicates that the influence of host-home country distance is more evident among small foreign banks which have lower franchise value. Overall, the findings of this paper suggest that although bank competition policies may promote customer welfare, foreign banks should be granted with some degree of market power in the host country to help alleviating the banks’ operational challenges arising from home-host country distance.

Suggested Citation

  • Toh, Moau Yong & Jia, Dekui, 2021. "Do foreign ownership and home-host country distance matter? Evidence on the impact of bank market power on liquidity creation in a selected Southeast Asian country," Research in International Business and Finance, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:riibaf:v:56:y:2021:i:c:s0275531920309582
    DOI: 10.1016/j.ribaf.2020.101350
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0275531920309582
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ribaf.2020.101350?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ayesha Hameed & Tahir Saeed Jagirani & Mohammad Qamar Qureshi & Aisha Riaz, 2024. "The Causal Linkages between Market Power and Cost Efficiency: Testing Quiet Life Hypothesis for the Banking Industry," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 13(1), pages 803-811.
    2. Toh, Moau Yong & Zhang, Yongmin, 2022. "Bank capital and risk adjustment responses to economic uncertainty: Evidence from emerging Southeast Asian economies," Research in International Business and Finance, Elsevier, vol. 60(C).
    3. Muhammad Usman & Rizwan Shabbir & Ilyas Ahmad & Ahsan Zubair, 2022. "Host Countries’ Institutional Environment and Multinational Enterprises: Does Home-Host Developmental Status Matter?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(4), pages 2640-2664, December.
    4. Bátiz-Zuk, Enrique & Lara-Sánchez, José Luis, 2022. "Measuring the evolution of competition and the impact of the financial reform in the Mexican banking sector, 2008–2019," Research in International Business and Finance, Elsevier, vol. 59(C).
    5. Jackowicz, Krzysztof & Kowalewski, Oskar & Kozłowski, Łukasz, 2022. "Foreign bank lending: The role of home country culture during prosperous and crisis periods," Journal of Multinational Financial Management, Elsevier, vol. 66(C).
    6. Hu, Tiancheng & Guo, Rui & Ning, Lutao, 2022. "Intangible assets and foreign ownership in international joint ventures: The moderating role of related and unrelated industrial agglomeration," Research in International Business and Finance, Elsevier, vol. 61(C).
    7. Sheng-Hung Chen & Feng-Jui Hsu, 2022. "National Governance Differences and Foreign Bank Performance in Asian Countries: The Role of Bank Competition," Computational Economics, Springer;Society for Computational Economics, vol. 59(4), pages 1283-1333, April.
    8. Tze Kiat Lui & Mohd Haniff Zainuldin, 2022. "Do foreign banks disclose corporate social responsibility practices more than their local counterparts? Empirical evidence of an emerging market context," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(5), pages 1855-1870, September.

    More about this item

    Keywords

    Liquidity creation; Market power; Ownership; Cultural distance; Economic distance; Institutional distance;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:riibaf:v:56:y:2021:i:c:s0275531920309582. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ribaf .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.