Browse > Article
http://dx.doi.org/10.13106/jafeb.2020.vol7.no11.707

Role of Information Sharing on the Impact of Foreign Banks' Penetration on Banking Competition  

ZOHREHVAND, Azadeh (School of Business and Economics, Universiti Putra Malaysia)
IBRAHIM, Saifuzzaman (School of Business and Economics, Universiti Putra Malaysia)
HABIBULLAH, Muzafar Shah (School of Business and Economics, Universiti Putra Malaysia)
YUSOP, Zulkornain (School of Business and Economics, Universiti Putra Malaysia)
MAZLAN, Nur Syazwani (School of Business and Economics, Universiti Putra Malaysia)
Publication Information
The Journal of Asian Finance, Economics and Business / v.7, no.11, 2020 , pp. 707-715 More about this Journal
Abstract
Globalization has led to an increase in foreign banks' penetration. It is argued that the presence of foreign banks may affect the banking sector of the host countries in several ways including their competition level. It is mentioned that the presence of the foreign banks could heightened the level of competition in the banking sector. Nonetheless, the impact of the foreign banks on competition could be influenced by the degree of information sharing in the banking industry. This study investigates the role of information sharing in moderating the impact of foreign bank penetration on host banking sector competition in selected developing countries. We employ panel data samples of 54 developing countries during the period from 1998 to 2016. The estimation is carried out using the two-step system of the Generalized Method of Moments (GMM) regression technique. This technique is adopted due to its robustness to all forms of endogeneity. The findings of this study show that the presence of information sharing could affect the relationship between foreign banks' penetration and competition. They suggest that improvement in information sharing by a host country may help foreign banks to improve monitoring and reduce the moral hazard and adverse selection problem.
Keywords
Foreign Banks' Penetration; Information Sharing; Banking Competition; Generalized Method of Moments;
Citations & Related Records
Times Cited By KSCI : 6  (Citation Analysis)
연도 인용수 순위
1 Beck, T., De Jonghe, O., & Schepens, G. (2013). Bank competition and stability: cross-country heterogeneity. Journal of Financial Intermediation, 22(2), 218-244.   DOI
2 Beck, T., Demirguc-Kunt, A., & Levine, R. (2006). Bank concentration, competition, and crises: First results. Journal of Banking & Finance, 30(5), 1581-1603.   DOI
3 Beck, T., Ioannidou, V., & Schafer, L. (2018). Foreigners vs. Natives: Bank lending technologies and loan pricing. Management Science, 64(8), 3792-3820.   DOI
4 Berger, A. N., Klapper, L. F., & Turk-Ariss, R. (2009). Bank competition and financial stability. Journal of Financial Services Research, 35(2), 99-118.   DOI
5 Bikker, J. A., Shaffer, S., & Spierdijk, L. (2012). Assessing competition with the Panzar-Rosse model: The role of scale, costs, and equilibrium. Review of Economics and Statistics, 94(4), 1025-1044.   DOI
6 Purwono, R., Nugroho, R. Y. Y, & Mubin, M. K. (2019). Response on New Credit Program In Indonesia: An Asymmetric Information Perspective. Journal of Asian Finance, Economics and Business, 6(2), 33-44. https://doi.org/10.13106/jafeb.2019.vol6.no2.33   DOI
7 Sengupta, R. (2007). Foreign entry and bank competition. Journal of Financial Economics, 84(2), 502-528.   DOI
8 Song, I. (2004). Foreign bank supervision and challenges to developing market supervisors. IMF Working Paper No. 04/82. Washington DC: IMF.
9 Wu, J., Jeon, B. N., & Luca, A. C. (2010). Foreign bank penetration, resource allocation and economic growth: evidence from developing economies. Journal of Economic Integration, 25(1), 167-193.   DOI
10 Yeyati, E. L., & Micco, A. (2007). Concentration and foreign penetration in Latin American banking sectors: Impact on competition and risk. Journal of Banking & Finance, 31(6), 1633-1647.   DOI
11 Miller, M. (2000). Credit reporting systems around the globe: the state of the art in public and private credit registries. Credit reporting systems and the international economy. Cambridge, MA: MIT Press.
12 Goddard, J., & Wilson, J.O. (2009). Competition in banking: a disequilibrium approach. Journal of Banking & Finance, 33(12), 2282-2292.   DOI
13 Gormley, T. A. (2007). Costly information, foreign entry, and credit access. Unpublished paper, Olin Business School, Washington University, St. Louis.
14 Jappelli, T., & Pagano, M. (2002). Information sharing, lending and defaults: Cross-country evidence. Journal of Banking & Finance, 26(10), 2017-2045.   DOI
15 Jeon, B. N., Olivero, M. P., & Wu, J. (2011). Do foreign banks increase competition? Evidence from developing Asian and Latin American banking markets. Journal of Banking & Finance, 35(4), 856-875.   DOI
16 Kallberg, J. G., & Udell, G. F. (2003). The value of private sector business credit information sharing: The US case. Journal of Banking & Finance, 27(3), 449-469.   DOI
17 Neter, J., Wasserman, W., & Kutner, M. H. (1985). Applied linear statistical models: Regression. Analysis of Variance, and Experimental Designs (2nd ed.). Homewood, IL: Richard D. Irwin.
18 Pagano, M., & Jappelli, T. (1993). Information sharing in credit markets. The Journal of Finance, 48(5), 1693-1718.   DOI
19 Pisedtasalasai, A., & Edirisuriya, P. (2020). Diversification and Performance of Sri Lankan Banks. Journal of Asian Finance, Economics and Business, 7(9), 1-10. https://doi.org/10.13106/jafeb.2020.vol7.no9.001   DOI
20 Demsetz, H. (1973). Industry structure, market rivalry, and public policy. The Journal of Law and Economics, 16(1), 1-9.   DOI
21 Choi, J. Y., & Kim, S. H. (2020). A Study on Organizational Forms in Foreign Expansion of Korean Banks. Journal of Asian Finance, Economics and Business, 7(7), 343-348. https://doi.org/10.13106/jafeb.2020.vol7.no7.343   DOI
22 Bikker, J. A., & Haaf, K. (2002). Competition, concentration and their relationship: An empirical analysis of the banking industry. Journal of Banking & Finance, 26(11), 2191-2214.   DOI
23 Bresnahan, T. F. (1989). Empirical studies of industries with market power. Handbook of Industrial Organisation, 2, 1011-1057.   DOI
24 Burrill, D. F. (1997). Modeling and interpreting interactions in multiple regression. The Ontario Institute for Studies in Education Toronto, Ontario Canada.
25 Claessens, S., & Laeven, L. (2004). What drives bank competition? Some international evidence. Journal of Money, Credit and Banking, 563-583.
26 Cook, R. D., & Weisberg, S. (1982). Criticism and influence analysis in regression. Sociological Methodology, 13, 313-361.   DOI
27 Claessens, S., & Van Horen, N. (2012). Foreign Banks: Trends, Impact and Financial Stability. Washington, DC: International Monetary Fund.
28 Claessens, S. (2017). Global banking: Recent developments and insights from research. Review of Finance, 21(4), 1513-1555.   DOI
29 Clarke, G., Cull, R., & Peria, M.S.M. (2002). How does foreign bank participation affect access to credit by SMEs? Evidence from survey data. World Bank Working Paper.
30 Darlington, R. B. (1990). Regression and linear models. New York, NY: McGraw-Hill College.
31 Demirguc-Kunt, A., & Peria, M.S.M. (2010). A framework for analysing competition in the banking sector: an application to the case of Jordan. Washington, DC: The World Bank.
32 Barth, J. R., Caprio Jr, G., & Levine, R. (2012). Guardians of finance: Making regulators work for us. Cambridge, MA: MIT Press.
33 Agoraki, M.E., Delis, M., & Pasiouras, F. (2011). Regulations, competition and bank risk-taking in transition countries. Journal of Financial Stability, 7(1), 38-48.   DOI
34 Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), 277-297.   DOI
35 Blatna, D. (2006). Outliers in regression. Trutnov, 30, 1-6.
36 Barth, J. R., Caprio Jr, G., & Levine, R. (2001). Banking systems around the globe: do regulation and ownership affect performance and stability? In Prudential supervision: What works and what doesn't (pp. 31-96). Chicago, IL: University of Chicago Press.
37 Barth, J. R., Caprio, G., & Levine, R. (2008). Rethinking bank regulation: Till angels govern. Cambridge, MA: Cambridge University Press.
38 Barth, J. R., Caprio, G., & Levine, R. (2013). Bank regulation and supervision in 180 countries from 1999 to 2011. Journal of Financial Economic Policy, 5, 111-220.   DOI