The impact of foreign bank penetration on the domestic banking sector: new evidence from China

Dan Luo; Yizhe Dong; Seth Armitage; Wenxuan Hou

doi:10.1080/1351847X.2014.1003314

The impact of foreign bank penetration on the domestic banking sector: new evidence from China

Dan Luo, Yizhe Dong^* (Corresponding Author), Seth Armitage, Wenxuan Hou

^*Corresponding author for this work

Accountancy & Finance, Finance

Research output: Contribution to journal › Article › peer-review

14 Citations (Scopus)

Abstract

This study proposes a foreign bank branch networks index (FBBNI) to capture bank-level exposure to competition from foreign banks in terms of geographical proximity. The index takes account of the rapidly expanding branch networks of both foreign and domestic banks in China. Based on data from a sample of three types of Chinese commercial banks from 2002 to 2011, we find that exposure to the branch networks of foreign banks is associated with improved profitability at domestic banks, higher efficiency, and increased non-interest income, consistent with knowledge transfer from foreign banks. These relationships are most pronounced for joint-stock domestic banks presumably because their ownership structure fosters knowledge transfer.

Original language	English
Pages (from-to)	752-780
Number of pages	29
Journal	European Journal of Finance
Volume	23
Issue number	7-9
Early online date	30 Jan 2015
DOIs	https://doi.org/10.1080/1351847X.2014.1003314
Publication status	Published - 2017

Bibliographical note

Acknowledgements
The authors are grateful, for their helpful comments and advice, to two anonymous referees, Angelica Gonzalez, Zhenyu Wu (discussant), and participants at the 3rd Conference on Chinese Capital Markets at University of Edinburgh Business School, July 2013.

Keywords

foreign exposure
bank performance
Chinese banking

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10.1080/1351847X.2014.1003314Licence: Unspecified

Cite this

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abstract = "This study proposes a foreign bank branch networks index (FBBNI) to capture bank-level exposure to competition from foreign banks in terms of geographical proximity. The index takes account of the rapidly expanding branch networks of both foreign and domestic banks in China. Based on data from a sample of three types of Chinese commercial banks from 2002 to 2011, we find that exposure to the branch networks of foreign banks is associated with improved profitability at domestic banks, higher efficiency, and increased non-interest income, consistent with knowledge transfer from foreign banks. These relationships are most pronounced for joint-stock domestic banks presumably because their ownership structure fosters knowledge transfer.",

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AU - Armitage, Seth

AU - Hou, Wenxuan

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AB - This study proposes a foreign bank branch networks index (FBBNI) to capture bank-level exposure to competition from foreign banks in terms of geographical proximity. The index takes account of the rapidly expanding branch networks of both foreign and domestic banks in China. Based on data from a sample of three types of Chinese commercial banks from 2002 to 2011, we find that exposure to the branch networks of foreign banks is associated with improved profitability at domestic banks, higher efficiency, and increased non-interest income, consistent with knowledge transfer from foreign banks. These relationships are most pronounced for joint-stock domestic banks presumably because their ownership structure fosters knowledge transfer.

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JF - European Journal of Finance

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The impact of foreign bank penetration on the domestic banking sector: new evidence from China

Abstract

Bibliographical note

Keywords

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