TY - JOUR

T1 - The effects of different modes of foreign bank entry in the Turkish banking sector during the 2007-2009 Global financial crisis

AU - Polovina, Nereida

AU - Peasnell, Ken

PY - 2023/2/21

Y1 - 2023/2/21

N2 - This paper provides insights on how foreign bank entry modes (acquisition vs. Greenfield investment) in an emerging market (Turkey) influenced bank strategies during the 2007–2009 global financial crisis. Using a comprehensive dataset comprising twenty-nine accounting variables from Turkish banks’ financial statements during 2005–2010, we find important differences between foreign-acquired banks and foreign bank branches in lending and sourcing funds. We find that foreign bank branches continued to support international trade by issuing import loans during 2007–2009 global financial crisis, whereas foreign-acquired banks focused on issuing consumer and credit card loans. In terms of bank sourcing funds, we find that foreign-acquired banks were able to continue to use foreign currency deposits of Turkish residents and local interbank funding including participation (Islamic) banks. Foreign bank branches, on the other hand, relied on sourcing funds from internationalinterbank funding and foreign currency deposits of residents abroad, which led to the necessity for them to change their strategies because of funding shortage in international markets. Our results show that the presence of foreign banks in Turkish banking sector enabled the continuity of bank lending activities in host market during the turmoil of 2007–2009 global financial crisis. Our findings on foreign bank entry mode provide new evidence and have important implications for both policy makers and practitioners in emerging markets.

AB - This paper provides insights on how foreign bank entry modes (acquisition vs. Greenfield investment) in an emerging market (Turkey) influenced bank strategies during the 2007–2009 global financial crisis. Using a comprehensive dataset comprising twenty-nine accounting variables from Turkish banks’ financial statements during 2005–2010, we find important differences between foreign-acquired banks and foreign bank branches in lending and sourcing funds. We find that foreign bank branches continued to support international trade by issuing import loans during 2007–2009 global financial crisis, whereas foreign-acquired banks focused on issuing consumer and credit card loans. In terms of bank sourcing funds, we find that foreign-acquired banks were able to continue to use foreign currency deposits of Turkish residents and local interbank funding including participation (Islamic) banks. Foreign bank branches, on the other hand, relied on sourcing funds from internationalinterbank funding and foreign currency deposits of residents abroad, which led to the necessity for them to change their strategies because of funding shortage in international markets. Our results show that the presence of foreign banks in Turkish banking sector enabled the continuity of bank lending activities in host market during the turmoil of 2007–2009 global financial crisis. Our findings on foreign bank entry mode provide new evidence and have important implications for both policy makers and practitioners in emerging markets.

KW - financial crisis

KW - strategic plans

KW - foreign ownership

KW - bank

KW - performance measurement

U2 - 10.3934/QFE.2023002

DO - 10.3934/QFE.2023002

M3 - Journal article

VL - 7

SP - 19

EP - 49

JO - Quantitative Finance and Economics

JF - Quantitative Finance and Economics

SN - 2573-0134

IS - 1

ER -