An application to analyze the impacts of sectoral growth and sectoral employment on foreign bank entries in transition economies (1990-2010)

Foreign ownership has standed out in banking sectors of world economies. Substantial and competitive banking system is required for a stable economy. Foreign banks have played an important role in development of banking sector in transition economies. This paper investigates the effects of sectoral growth and employment variables on foreign bank entries in transition economies. This paper?s difference is to search sectoral determinants of foreign bank entries for Gross Domestic Product (GDP) and employment variables. In this context, paper has two main models that include agriculture, industry and service sectors of GDP and employment as determinants of foreign bank entries.This study uses Panel Data Analysis for 1990-2010 period in 27 transition economies. According to results, control variables that are urbanization growth rate, total population growth rate, credit per capita and the ratio of foreign direct investment to GDP have been shown to be positevly and statistically significant related to foreign bank entries. On the other hand, the ratio of non-performing loans to total loans and inflation rates have significantly negative sign on foreign bank entries. Exchange rates is only found statistically insignificant among all control variables. GDP growth of industry sector, GDP growth of service sector, employment growth of industy sector and employment growth of service sector have had a significantly positive impact on foreign bank entries. Conversely, GDP growth of agriculture sector and employment growth of agriculture sector haven?t been a significantly effect on foreign bank entries.Keywords: Foreign Banks, Transition Economies, Foreign Ownership, Sectoral Growth, Sectoral Employment