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

Nereida Polovina; Ken Peasnell; Nereida Polovina; Ken Peasnell

doi:10.3934/QFE.2023002

Quantitative Finance and Economics

2023, Volume 7, Issue 1: 19-49. doi: 10.3934/QFE.2023002

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Research article

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

Nereida Polovina ^{1
,
,},
Ken Peasnell ²

1.
Department of Accounting, Finance and Banking, Manchester Metropolitan University Business School, Manchester, M15 6BH, United Kingdom
2.
Department of Accounting and Finance, Lancaster University Management School, Lancaster, LA1 4YX, United Kingdom

Received: 18 November 2022 Revised: 31 January 2023 Accepted: 13 February 2023 Published: 21 February 2023
JEL Codes: F65, G21, G32, L21, L25

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 international interbank 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.
- financial crisis,
- bank,
- foreign ownership,
- strategic plan,
- performance measurement
Citation: Nereida Polovina, Ken Peasnell. The effects of different modes of foreign bank entry in the Turkish banking sector during the 2007–2009 Global financial crisis[J]. Quantitative Finance and Economics, 2023, 7(1): 19-49. doi: 10.3934/QFE.2023002

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Abstract

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 international interbank 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.

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