Banking Market Liberalization and Bank Performance: the Role of Entry Modes

This paper analyzes the evolution in bank performance following the removal of legal restrictions on the entry of foreign banks in three transition economies: the Czech Republic, Hungary, and Poland. Two modes of foreign bank entry are considered: entry by Greenfield investments, and by foreign mergers and acquisitions of domestic banks. For this purpose, we construct a panel data of banks from the three countries over the period 1994-2004. We determine the dates on which liberalization occurred in each country. Bank performance is reflected by accounting measures of profitability, net interest margin, and operating costs. The results show a very limited effect of the entry of Greenfield banks on domestic banking market in the early transition period. In contrast, the foreign entry by mergers and acquisitions of domestic banks exerts significant impacts on bank performance. Indeed, we observe significant declines in banks' profits and net interest margins, and a significant increase in operating costs. Our results have important policy implications for those emerging and transition economies still hesitant to liberalize their banking markets.http://deepblue.lib.umich.edu/bitstream/2027.42/64408/1/wp948.pd

Asymptotic analysis of a semi-linear elliptic system in perforated domains: well-posedness and correctors for the homogenization limit

In this study, we prove results on the weak solvability and homogenization of a microscopic semi-linear elliptic system posed in perforated media. The model presented here explores the interplay between stationary diffusion and both surface and volume chemical reactions in porous media. Our interest lies in deriving homogenization limits (upscaling) for alike systems and particularly in justifying rigorously the obtained averaged descriptions. Essentially, we prove the well-posedness of the microscopic problem ensuring also the positivity and boundedness of the involved concentrations and then use the structure of the two scale expansions to derive corrector estimates delimitating this way the convergence rate of the asymptotic approximates to the macroscopic limit concentrations. Our techniques include Moser-like iteration techniques, a variational formulation, two-scale asymptotic expansions as well as energy-like estimates.Comment: 22 pages, 1 figur

Banking Market Liberalization and Bank Performance: the Role of Entry Modes

This paper analyzes the evolution in bank performance following the removal of legal restrictions on the entry of foreign banks in three transition economies: the Czech Republic, Hungary, and Poland. Two modes of foreign bank entry are considered: entry by Greenfield investments, and by foreign mergers and acquisitions of domestic banks. For this purpose, we construct a panel data of banks from the three countries over the period 1994-2004. We determine the dates on which liberalization occurred in each country. Bank performance is reflected by accounting measures of profitability, net interest margin, and operating costs. The results show a very limited effect of the entry of Greenfield banks on domestic banking market in the early transition period. In contrast, the foreign entry by mergers and acquisitions of domestic banks exerts significant impacts on bank performance. Indeed, we observe significant declines in banks' profits and net interest margins, and a significant increase in operating costs. Our results have important policy implications for those emerging and transition economies still hesitant to liberalize their banking markets.Banking, Transition Economies, Foreign Bank Entry, Greenfield Investment, Mergers and Acquisitions, Bank Performance.