| With the worldwide view, this study examines why foreign banks entry into the host countries and how they has influenced the host commercial banking industry. Using bank level data for 50 countries in the 2000-2005 periods, this paper analysis this data and estimate the result empirically with the econometrics tool.Which affect the entry of foreign banks? And how does foreign entry affect the domestic banking? This paper just follows this research route. For the first step, we gain the status of foreign entry and the performance difference between foreign and domestic banks in worldwide, then analysis the reason. After that, we estimate empirically the Eclectic Paradigm and influence which is the change of foreign entry to the performance of domestic banks.The main result of data in foreign banks penetration is that foreign banks are inclined to entry into the transition and middle-level income countries. On the other hand, the comparison of performance between foreign and domestic banks tell us that the management of foreign banks is more moderate and the performance in developing counties is better than the developed countries. And the foreign banks make great effort in Asian markets at present.Next, we estimate empirically why and how foreign bank entry. First, we estimate the Dunning Eclectic Paradigm with multi-county and multi-market data, the demonstration tell us that the ownership and location advantages receive strong supports but not the internalization advantage. Then we select six indexes which about the management and profit earning capacity of domestic banks to reflect the influence of foreign bank entry. The functioning of foreign relative to domestic banks is very different in developing and developed countries. Estimation result further suggest that an increase in the share of foreign banks leads to a lower profitability of domestic banks, which is the result of improving the efficiency of domestic banking markets. |
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