Foreign Entry And Multiple-Stage Credit Competition In Bank Industry:A Steady-state Model

摘要

Suppose that the foreign bank has cost advantage and the domestic bank has information advantage, this paper develops a steady-state model in a multi-phase and dynamic credit competition. We find that it is hard for the domestic bank to hinder entry of the foreign bank although the former is endowed with information advantage, and the multi-phase competition will make it easier for the foreign bank to enter the domestic credit market, and also more likely to become the dominant party in the steadystate. The comparatively static analysis shows further that the better is the quality of borrowers, the higher is the payoff of project and the faster is the growth of the new markets, the more likely is it for the foreign bank to become the dominant party. As the payoff of project and the growth rate of the new markets increase, the market share of the dominant bank in the steady-state will decrease. However, the quality of borrowers has a monotonous effect on the market share if the domestic bank becomes the dominant party and has a non-monotonic effect when the foreign bank dominates.