Determinants of Foreign Bank Entry to the Central Asia

In the last twenty years foreign banks have expanded their presence expressively in almost all developing economies, especially transition countries. Most researches on this subject have focused on foreign entry impact on domestic banks’ performance. But we examined the determinants from foreign banks’ perspective of view. This thesis investigates determinants of foreign bank entry to the Central Asian countries. The internal and external aspects were reviewed, and the relationship between these factors and foreign bank participation in Central Asian countries were hypothesized. The current performance of the banking sector these countries were taken into account and described in details. The previous researches related to foreign entry from various countries were also taken into consideration. The macroeconomic, macro-banking and bank specific factors were identified for analyze determinants of foreign bank entry by taking into consideration the Net Interest Margin, Return on Assets, Capital Risk, Credit Risk, Inflation rate, GDP growth, FDI net inflows, Rule of Law and Domestic Credit to Private Sector by Banks . The modification of the dependent and independent variables of the regression model were displayed by using the Panel Data Analysis Method. The empirical analysis and the results produced by panel data were employed to find the factors influencing the foreign bank entry. The results showed that Rule of Law and Net Interest Margin have significant impact on foreign bank entry, whereas other variables have different results depending on models which we constructed. Keywords: Central Asia, Foreign bank entry, Banking sector