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The Effects of Foreign Bank Entry on the Thai Banking Market: Empirical Analysis from 1990 to 2002

Author

Listed:
  • Okuda, Hidenobu
  • 奥田, 英信
  • オクダ, ヒデノブ
  • Rungsomboon, Suvadee

Abstract

This paper investigates the impact of foreign bank entry on Thai domestic banks by using panel data on 17 domestic commercial banks from 1990 to 2002. The paper examines different factors affecting bank performance, including changes in the foreign ownership of banks, financial regulations, and market structure. We find that an increase in foreign bank presence leads to a rise in overhead expenses, a decline in profits, and an increase in the interest spreads of domestic banks. In the short run, increased competition from foreign banks negatively affects domestic banks. However, in the long run, domestic banks' performance should improve.

Suggested Citation

  • Okuda, Hidenobu & 奥田, 英信 & オクダ, ヒデノブ & Rungsomboon, Suvadee, 2005. "The Effects of Foreign Bank Entry on the Thai Banking Market: Empirical Analysis from 1990 to 2002," CEI Working Paper Series 2004-20, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:hitcei:2004-20
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    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/13919/wp2004-20a.pdf
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    References listed on IDEAS

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    1. Mr. Ayhan Kose & Mr. Kenneth Rogoff & Mr. Eswar S Prasad & Shang-Jin Wei, 2003. "Effects of Financial Globalization on Developing Countries: Some Empirical Evidence," IMF Occasional Papers 2003/007, International Monetary Fund.
    2. Weller, Christian E. & Scher, Mark J., 1999. "Multinational banks and development finance," ZEI Working Papers B 16-1999, University of Bonn, ZEI - Center for European Integration Studies.
    3. Clarke, George & Cull, Robert & Martinez Peria, Maria Soledad & Sanchez, Susana M., 2001. "Foreign bank entry - experience, implications for developing countries, and agenda for further research," Policy Research Working Paper Series 2698, The World Bank.
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    Cited by:

    1. Süer, Ömür & Levent, Haluk & Şen, Süleyman, 2016. "Foreign entry and the Turkish banking system in 2000s," The North American Journal of Economics and Finance, Elsevier, vol. 37(C), pages 420-435.
    2. Chantal Herberholz, 2008. "The Foreign Bank Effect On Value Creation In Commercial Banks Incorporated In Thailand," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 53(02), pages 215-244.
    3. Lu, Wanxue & Mieno, Fumiharu, 2020. "Impact of foreign entry into the banking sector: The case of Thailand in 1999–2014," Pacific-Basin Finance Journal, Elsevier, vol. 64(C).

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    More about this item

    Keywords

    Bank Performance; Foreign Entry; Crisis; Thailand;
    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
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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