Are foreign banks disadvantaged vis-a-vis domestic banks in China?

Liu, Li Xian, Jiang, Fuming, Sathye, Milind, and Liu, Hongbo (2021) Are foreign banks disadvantaged vis-a-vis domestic banks in China? Journal Of Risk And Financial Management, 14 (9). 404.

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Abstract

Do foreign banks enjoy a competitive edge in the Chinese banking market or are they disadvantaged vis-à-vis domestic banks? This is the question that the present paper seeks to answer. The issue is important since on the one hand, these banks face the challenges the liability of foreignness brings, but at the same time, they have bank-specific advantages. We examine this issue in light of the literature of the liability of foreignness. In our path-breaking study, we found that due to the cost of foreignness, foreign banks’ performance was not as good as that of the local banks. Furthermore, despite the same amount of location- and bank-specific advantages, they performed badly as compared to their local counterparts. It was found that the cost of location-based disadvantages outweighed the cost of bank-specific disadvantages for foreign banks, and recent policy changes may help them overcome some of the cost of foreignness.

Item ID: 69132
Item Type: Article (Research - C1)
ISSN: 1911-8074
Keywords: liability of foreignness; transitional banking sector; location-based advantages; firm-specific advantages
Copyright Information: © 2021 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license https://creativecommons.org/licenses/by/4.0/).
Date Deposited: 31 Aug 2021 00:04
FoR Codes: 35 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 3502 Banking, finance and investment > 350204 Financial institutions (incl. banking) @ 50%
35 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 3507 Strategy, management and organisational behaviour > 350709 Organisation and management theory @ 50%
SEO Codes: 28 EXPANDING KNOWLEDGE > 2801 Expanding knowledge > 280108 Expanding knowledge in economics @ 100%
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