How Does Foreign Entry Affect the Domestic Banking Markets?

... examines the extent and effect of foreign presence in domestic banking markets. We investigate how net interest margins, overhead, taxes paid, and profitability differ between foreign and domestic banks. We find that foreign banks have higher profits than domestic banks in developing countries, but the opposite is the case for developed countries. Estimation results suggest that a increased presence of foreign banks is associated with a reduction in profitability and margins for domestic banks