| Economic globalization and international financial flows have become an important symbol of economic development over the past few decades. And foreign banks, which are important form of financial flows has made rapid development, especially in developing countries in the last decades. Both the number and the share of foreign banks increased in host countries, which implies they are playing more important rule in these countries. Since foreign banks became an inevitable part of countries financial issues, it is necessary to seek factors that influence the participation of foreign banks.Under globalization the requirement for Bank Regulation and Supervision in host country is become a first concern by both academics and practitioners involved, especially after the World Financial Crisis in 2008. The present research is far from enough, because of the lack of available detailed data on cross-country bank regulations. However, the article Bank Regulation and Supervision Surveys (Barth, Caprio, Levine) help overcome this data availability issue. It offers standardized supervision index data from 180 regulation authorities from 1999 to 2011. Based on Location Advantage of Eclectic Theory we choose 5 factors to exam the relationship between supervision from regulation authorities and participation of foreign banks. We hope to give a reference for further innovation research and a theoretical support for regulation improvement.The main body of this article is the regression of the relationship between bank supervisions in host country and share of foreign banks. The share variables we use to explain are follows:"Share number foreign banks", "Share foreign bank assets", the supervision data we use is:"Limitations on Foreign Bank Entry/Ownership", "Fraction of Entry Applications Denied", "Capital Regulatory Index", "Private Monitoring Index", "various Factors Mitigating Moral Hazard in Deposit Insurance Scheme Variables". A roughly regression will be done firstly, then we divide host countries into two parts:developing countries and developed countries, then we test them separately.The test result shows that foreign bank prefers smoothly regulating environment. In details:1, "Limitations on Foreign Bank Entry/Ownership" has a strong positive relationship between both "Share number foreign banks" and "Share foreign bank assets" the relationship is stronger in developing country than developed country.2, The model shows strong negative relationship between "Fraction of Entry Applications Denied" and both "Share number foreign banks" and "Share foreign bank assets".3, "Capital Regulatory Index " has negative relationship with "Share number foreign banks" in developed country after 2008, while has negative relationship with "Share foreign bank assets" in developing country.4, "Private Monitoring Index" has significant negative relationship with "Share number foreign banks" in developing countries and "Share foreign bank assets" in developing countries after 2008.5, "various Factors Mitigating Moral Hazard" has positive relationship with "Share number foreign banks". In general, less stringent bank regulations in host country attract more foreign banks, especially in developing countries.In conclusion, there are three innovation points in the article. First, it is the first time to regress the relationship between bank regulations in host country and share of foreign banks, which is based on location advantage theory. Second, the host countries are divided into developed countries and developing countries. Third, this article presents a description of the settlement of foreign banks in China.However, there still exist some issues to be improved. Due to the lack of more data, we cannot show the most present relationship. And how these relationships change in future needs further discussion. |
