Foreign bank entry in South East Asia

This paper examines the determinants of foreign bank entry in South East Asian countries after significant policy changes following the regional financial crisis in 1997/1998. The results show that manufacturing FDI and bilateral trade exert weak impacts on the decision of entry by foreign banks, pr...

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Bibliographic Details
Published in:International review of financial analysis 2013-12, Vol.30, p.26-35
Main Authors: Molyneux, Philip, Nguyen, Linh H., Xie, Ru
Format: Article
Language:English
Subjects:
Banking industry
Decision making
Foreign bank entry and motivation
Foreign business
Foreign ownership
Market entry
Market penetration
South East Asian banking
Studies
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Summary:This paper examines the determinants of foreign bank entry in South East Asian countries after significant policy changes following the regional financial crisis in 1997/1998. The results show that manufacturing FDI and bilateral trade exert weak impacts on the decision of entry by foreign banks, providing little evidence for the argument that banks follow their home customers abroad. In contrast, local profit opportunities appear to be the prominent factor attracting foreign bank penetration in South East Asia. The results are robust to different modelling techniques. •We examine the motives for foreign bank entry in SE Asia.•Profit opportunities appear to matter more than customer-following incentives.•Banks move to countries where they can make more profits.•FDI and trade flows exert only a marginal effect on foreign bank presence.•Entry will be greater the lower the relative efficiency of domestic banks.
ISSN:1057-5219
1873-8079
DOI:10.1016/j.irfa.2013.05.004