مطالعه هزینه نسبی بانک های داخلی و خارجی تایلند در 1990-2002: پیامدهای سیاسی آن برای ساختار صنعت بانکداری مطلوب
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|18268||2006||24 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Asian Economics, Volume 17, Issue 4, October 2006, Pages 714–737
This paper investigates the changing production technologies of foreign and domestic banks in Thailand in relation to increased foreign bank penetration by estimating their cost functions using panel data from 28 banks during 1990–2002. Our analysis suggests that foreign and domestic banks have the different advantages in their information production and processing. After the Asian crisis, more stringent prudential regulations improved the comparative cost performance of foreign banks. Foreign acquisition of domestic banks reduced costs associated with fee-based businesses and improved their operational efficiency. The analysis provides some evidence that consolidating domestic banks, allowing greater foreign bank penetration and enhancing information sharing system are needed to build a desirable banking industry structure.
Although foreign bank penetration has increased in many transitional and emerging market countries since the 1990s, like other ASEAN countries, foreign bank entry had been strictly regulated in Thailand before the 1997 financial crisis. Since foreign banks were not allowed to possess a branch network, they concentrated on wholesale services focusing on mother countries’ companies. These restrictions were relaxed under the postcrisis financial reforms, and foreign bank penetration then increased substantially. Foreign ownership rose significantly in several large domestic banks, and some small domestic banks were acquired by foreign banks. Foreign banks have a strong influence not only on wholesale market customers but also those in retail markets. They eagerly entered the retail markets through participation in majority ownership of domestic banks. It is expected that financial deregulation will progress further under the WTO agreements, and the presence of foreign financial institutions will continue to rise. This movement is expected to be a significant catalyst for change in the domestic banking industry.1 The optimal structure of the banking industry and the regulatory constraints that would be conducive to such a structure are critically dependent on the technological characteristics of banking industry. In order to evaluate the impact of foreign penetration and to formulate the most appropriate policies to align foreign banks with the long-term goals within the Thai banking market, it is essential to investigate the differences in production technology between foreign and Thai domestic banks and the progressive changes resulting from an upturn in foreign penetration in recent years. In practice, the impacts of foreign bank penetration and the suitability of their banking policies have remained without scrutiny to date. Although the influence of foreign banks has been increasing in Thai banking markets since the 1990s, there have been few formal economic studies evaluating the comparative performance of foreign and domestic banks in Thailand. The few studies that the authors are aware of include Intarachote and Brown (2000), Leightner and Lovell (1998) and Okuda and Mieno (1999), who investigated the efficiency and productivity of foreign and Thai banks in terms of their progress in financial liberalization in the pre-Asian crisis period. Montgomery (2003) examined the role of foreign banks in post-crisis Asia countries, including Indonesia, Korea, Malaysia and Thailand, focusing particularly on the importance of the method of entry. However, there is no econometric analysis in his study. As far as the authors know, Chantapong (2003) is the only academic study investigating the comparative performance of foreign and domestic banks amid deepening foreign penetration after the Asian crisis. There has been no economic study investigating the production technology of foreign and Thai domestic banks relating to the overall development process of foreign entry before and after the Asian crisis. The purpose of this paper is to conduct a microeconomic examination of commercial banks in Thailand, focusing on technological features recognized to be vital in evaluating increased foreign participation in the banking market. While the financial services produced by banks cannot be measured directly, technological differences between foreign and domestic banks are reflected in the different cost performances between them. Based on this idea, by applying panel data from 28 commercial banks taken from the period 1990–2002, we estimate the cost functions of Thai domestic banks, foreign joint venture banks and foreign bank branches, paying attention to the impact of financial reform policies. In order to avoid ad hoc empirical analysis, we carefully categorize the group of banks and select the variables used in the estimated functions based on the framework of microeconomics. First and foremost, this paper will undertake a fact-finding to track business operations of Thai domestic and foreign banks from the 1990s up to 2002. Specifically, this paper focuses on the following four questions. First, did different information production technology used by foreign and Thai domestic banks impact on their cost performance? Second, if so, what was the nature of major differences in production technology between Thai domestic banks and foreign bank branches? Third, how did the production technology of domestic venture banks change by foreign majority acquisition that was accelerated by financial reforms following the Asian financial crisis? Fourth, how did the post-Asian crisis financial reform policies strengthening prudential regulations and modernization of the banking industry affect the performance of Thai domestic banks and foreign bank branches? Then, based on the technological characteristics of the banks identified, we will discuss the appropriateness of foreign bank entry policy in Thailand as well as its implications for future banking policies. This paper consists of seven sections. Section 2 briefly reviews related literatures and mentions the focuses of our study. Section 3 provides an overview of the development of foreign bank entry in the Thai banking market during the period 1990–2002. Section 4 presents the methodology of regression analysis of the commercial banks’ cost performance in Thailand focusing on the impact of foreign participation. Section 5 discusses the results of the regression analysis and Section 6 examines the robustness of our estimation. Finally, Section 7 summarizes the analysis and refers to the derived policy implications.
نتیجه گیری انگلیسی
The results of our empirical analysis provide the following evidence that the recent Thai financial reform policies, particularly allowing greater foreign bank penetration, are on the right track to building an efficient and stable desirable banking system in which the recurrence of Asian financial crisis is prevented. First, according to our empirical analysis, the production technologies for foreign bank branches are distinct from those of Thai domestic banks. Foreign bank branches provide services that are human capital intensive and physical capital intensive, while domestic banks provide services that are fund intensive. These performance characteristics of foreign bank branches reflect that they maintain highly skilled workers and invest in advanced technology, limit their credit exposure, and mostly focus on advanced services in investment banking and private banking. On the other hand, Thai domestic banks focus on fund-based business, i.e. traditional retail banking services centering on taking deposits and extending loans. This suggests that appropriate role sharing between foreign bank branches and their Thai rivals can be determined by their respective functional advantages. Foreign bank branches have the advantage in advanced screening and monitoring techniques and sophisticated risk management skills, which are needed in the wholesale market centering on multi-national corporations and large Thai corporations. Thai domestic banks have the advantage in information production based on a long-term relationship with customers and utilize soft information, which are needed in the retail market where basic banking services are provided to ordinary Thai corporations and households. Second, the estimated results show that the financial reform policies adopted after the Asian crisis pushed up the operational costs of Thai domestic banks, whereas they pushed down the operational costs of foreign bank branches. This suggests that strengthening prudential regulations and upgrading monitoring systems significantly increases the cost of screening and monitoring borrowers that is inevitable for modernizing the risk management functions of Thai domestic banks. On the other hand, the modernization of business practices and improvement of financial regulations and corporate laws after the Asian financial crisis substantially lessened the disadvantage of foreign bank branches in information correction and credit risk examination in the Thai banking market. This enabled foreign bank branches to make full use of their advanced skills and technology in information production as well as risk management functions for providing financial services. As a result, the operational costs of foreign bank branches were reduced after the financial reform policies were adopted. Third, our empirical study shows that the joint venture banks changed their cost performance drastically in the few years after they were acquired by foreign investors. These foreign-acquired banks had operational characteristics similar to those of foreign bank branches, reflecting their intensive efforts in business restructuring and modernization investment. Their efforts contribute to enhancing the screening and monitoring function and providing a sophisticated risk management function backed by their financial engineering technology and database of customers’ business tracks. In general, we found that foreign majority acquisition of Thai domestic banks is likely to improve the functioning of the domestic banking market, which ultimately results in positive welfare implications for their customers. Accordingly, the impact of increased foreign participation has evidently been positive. Fourthly, according to the estimation results, there are economies of scale in Thai domestic banks, foreign-acquired banks and foreign bank branches, meaning that enlarging the operational size of banks helps improve cost efficiency. Following the crisis, there has been an increase in fixed costs for domestic banks and foreign-acquired banks owing to large investments in advanced technology. The banking business requires a significant amount of fixed cost to maintain branches and information-processing equipment for their screening and monitoring functions and risk management functions. This implies that the banks, particularly small foreign-acquired banks, should increase their scale to reduce the average cost of new investments. These observations support the current financial reform policy that scale expansion from the merger and acquisition process is important for the improvement in operational efficiency and should be encouraged further.18 On the other hand, economies of scope were evident only in foreign-acquired banks, whereas they were not observed in either Thai domestic banks or foreign bank branches. Similar to domestic banks, foreign-acquired banks have the advantage in producing soft information based on a long-term relationship with customers, and at the same time, similar to foreign banks, they have the advantage in rigorous screening and monitoring functions as well as advanced risk management skills. Foreign-acquired banks succeeded in providing the complimentary financial services demanded by their relatively small but well focused customer base. Following the example of the business practices of foreign-acquired banks, both Thai domestic banks and foreign bank branches should make additional efforts to improve cost efficiency and realize the economies of scope that are to emerge through efficient banking operations. Finally, enhancing the information sharing system is needed to improve the information production of banks, which is a requisite for realizing appropriate role sharing among domestic and foreign banks based on their comparative advantages. The establishment of a central credit bureau is one from of an information sharing coalition. It has been suggested that the gap in comparative informational advantages between foreign banks and domestic banks has become smaller. Due to information sharing, foreign banks are expected to be better informed about their lenders than before. This may reflect the changes in the behavior of banks. Foreign banks may be more active in participating in traditional loan business especially in lending to information opaque firms. This should be a good sign for domestic economies where the proportions of small and medium-sized firms are relatively high.