Impact of foreign ownership on market power: Do regional banks behave differently in ASEAN countries?

Yildirim, Canan; Kasman, Adnan; Hamid, Fazelina Sahul

Abstract

The change in crossborder financial intermediation and rise in regional banking have consequences for competitive conduct in emerging countries' banking markets. Using data from the Association of Southeast Asian Nations countries' banks during 2011–2018, we examine the nexus between foreign ownership and banks' market power by controlling for the heterogeneity of foreign banks concerning their countries of origin (advanced vs. emerging and regional vs. nonregional). We find that the increasing presence of foreign banks from advanced countries is associated with lower bank market power because of higher marginal costs and lower price–cost margins of the domestic banks. However, the increasing presence of emerging countries’ banks is associated with higher bank market power because of lower marginal costs and prices of domestic lenders. Our findings have implications for policies regarding bank competitiveness and promoting regional banking integration because domestic banks conduct differently under increased participation levels of advanced and emerging country foreign banks.

• Journal Article Type: Article
• Acceptance Date: May 11, 2021
• Online Publication Date: Sep 29, 2021
• Publication Date: Dec 1, 2021
• Deposit Date: Mar 14, 2023
• Journal: Economic Modelling
• Print ISSN: 0264-9993
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 105
• Pages: 105654
• DOI: https://doi.org/10.1016/j.econmod.2021.105654
• Keywords: Economics and Econometrics
• Public URL: https://uwe-repository.worktribe.com/output/10307880
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S0264999321002431?via%3Dihub
• Additional Information: This article is maintained by: Elsevier; Article Title: Impact of foreign ownership on market power: Do regional banks behave differently in ASEAN countries?; Journal Title: Economic Modelling; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.econmod.2021.105654; Content Type: article; Copyright: © 2021 Elsevier B.V. All rights reserved.