Swami, Onkar Shivraj and Vishnu Kumar, N. Arun and Baruah, Palash (2012): Determinants of the exit decision of foreign banks in India. Published in: Ushus Journal of Business Management , Vol. 10, No. 1 (2011): pp. 1-16.
Download (193Kb) | Preview
There is hardly any study in the existing literature regarding the foreign banks’ exit decision in India. This study tries to identify the CAMEL (i.e., C=Capital adequacy, A=Asset quality, M=Management decision, E=Earning ability and L=liquidity) variables that could qualify as the determinant of foreign banks closing their business operations in India which entered after the financial sector reforms. Logistic Regression Model was used to identify the risk factors associated with the closure of business-operation of foreign banks in India. It seems that foreign banks with higher non-performing assets (NPAs), lower return on equity and lesser profit per employee were more likely to close their business in India than otherwise.
|Item Type:||MPRA Paper|
|Original Title:||Determinants of the exit decision of foreign banks in India|
|Keywords:||CAMEL, Logistic Regression Model, Foreign Banks, India|
|Subjects:||C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C12 - Hypothesis Testing: General
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages
|Depositing User:||Onkar Swami|
|Date Deposited:||10. May 2012 12:57|
|Last Modified:||12. Feb 2013 08:30|
1. Altman, E. I. (1968) Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy. Journal of Finance, 23(4), 589-609.
2. Altman, E. I. (1977) Predicting Performance in the Savings and Loan Association Industry. Journal of Monetary Economics, 3(4), 443-466.
3. Andersen, H. (2008) Failure Prediction of Norwegian Banks; A Logit Approach. Working Paper, Norges Bank.
4. Avery, R. B., and Hanweck, G. A. (1984) A Dynamic Analysis of Bank Failures. Research Papers in Banking and Financial Economics, 74, Board of Governors of the Federal Reserve System.
5. Barth, J. R., Brumbaugh, R. D., Sauerhaft, D., and Wang, G. H. K. (1985) Thrift Institution Failures: Causes and Policy Issues. Proceedings, Federal Reserve Bank of Chicago, 184-216.
6. Beaver, W. H. (1966) Financial Ratios as Predictors of Failure. Journal of Accounting Research, 4, 71-111.
7. Claessens, S., Demirgüç-Kunt A., Huizinga H. (2001) How does foreign entry affect domestic banking markets? Journal of Banking and Finance 25(5), 891-911.
8. Clarke, G., Cull R., Molinaria A. (1999) The effect of foreign entry on Argentina's domestic banking sector. Policy Research Working Paper 2158, The World Bank.
9. Cole, R.A., and Gunther, J.W. (1998) Predicting Bank Failures: A Comparison of On- and Off-Site Monitoring Systems. Journal of Financial Services Research, 13 (2), 103-117.
10. Crowley, F.D., Loviscek A. L. (1990) New directions in predicting bank failures: the case of small banks. North American Review of Economics and Finance 1 (1), 45-162.
11. Espahbodi, P. (1991) Identification of Problem Banks and Binary Choice Models. Journal of Banking and Finance, 15 (1), 53-71.
12. Estrella, A., Park, S., and Peristiani, S. (2000) Capital Ratios as Predictors of Bank Failure. Economic Policy Review, Federal Reserve Bank of New York, 6.
13. Gomez, C. (2008) Financial Markets Institutions and Financial Services. PHI Learning Pvt. Limited, New Delhi. 14. Gormley, T. A. (2010). The impact of foreign bank entry in emerging markets: Evidence from India. Journal of Financial Intermediation, 19(1) , 26–51
15. Hair, J. F., Anderson, R. E., Tatham, R. L., Black, W. C. (1995) Multivariate Data Analysis. Prentice Hall International.
16. Hwang, D-Y., Lee, C.F., and Liaw, K.T. (1997) Forecasting Bank Failures and Deposit Insurance Premium. International Review of Economics and Finance, 6 (3), 317-334.
17. Keshari, P. K., and Paul, M.T. (1994) Relative Efficiency of Foreign and Domestic Banks. Economic and Political Weekly, 29(9), M31-M36
18. Lennox, C. (1999) Identifying Failing Companies: A Re-evaluation of the Logit, Probit and DA Approaches. Journal of Economics and Business, 51 (4), 347-364.
19. Martin, D. (1977) Early Warning of Bank Failure: A Logit Regression Approach. Journal of Banking and Finance, 1(3), 249-276.
20. Miller, S.M., and Noulas, A.G. (1995) Explaining Recent Connecticut Bank Failures. Working Paper of Department of Economics, University of Connecticut, USA.
21. Mohan, R. (2006a) Reforms, productivity and efficiency in banking: the Indian experience. Reserve Bank of India Bulletin, Reserve Bank of India, March.
22. Reserve Bank of India. (1995-2007) Statistical tables relating to Banks in India. RBI: Mumbai.
23. Sathey, M. (2005). Privatization, performance and efficiency: A study of Indian Banks. Vikalpa, 30(1), 7-16.
24. Sensarma, R. (2006) Are foreign banks always the best? Comparison of state-owned, private and foreign banks in India. Economic Modelling, 23(4), 717-735.
25. Sinkey, Jr., J.F. (1975). A Multivariate Statistical Analysis of the Characteristics of Problem Banks. Journal of Finance, 30(1), 21-36.
26. Tarapore, S.S. (1999) Indian banking: preparing for the next round of reform. In: Hanson, J.A., Kathuria, S. (Eds.), India: A Financial Sector for the Twenty First Century. Oxford University Press, New Delhi, pp. 57–131
27. Thomson, J. B. (1991) Predicting Bank Failures in the 1980s. Economic Review, Federal Reserve Bank of Cleveland, 9-20.
28. Unite, A.A., Sullivan, M.J. (2002) The effect of foreign entry and ownership structure on the Philippine domestic banking market. Journal of Banking and Finance, 27 (12), 2249- 2271.
29. Wheelock, D. C., and Wilson, P. W. (2000) Why do Banks Disappear? The Determinants of U.S. Bank Failures and Acquisitions. The Review of Economics and Statistics, MIT Press, 82(1), 127-138.
30. Zhao, T., Casu, B., Ferrari, A. (2010) The impact of regulatory reforms on cost structure, ownership and competition in Indian banking. Journal of Banking and Finance, 34(1), 246-254.