An important challenge in economics is to explain what causes firms to exit. The standard answer is low profitability. This answer leaves, however, open a number of questions as profitability partly depends on factors that are difficult to measure, for example, demand conditions, efficiency and market structure. In addition, due to market imperfections and regulations, other variables may also play a role in explaining exits.
In the empirical literature, several variables have been used in order to explain exits. These include plant size, see Mata, Portugal and Guimarães (1995); capital intensity, see Boeri and Bellmann (1995); financial leverage, see Dimitras, Zanakis and Zopounidis (1996); productivity, see Olley and Pakes (1996); capital vintage, see Salvanes and Tveterås (2004), and demand shocks, see Foster, Haltiwanger and Syverson (2005). The purpose of the present paper is to identify, through a structural microeconometric model with heterogeneous firms, imperfect competition and adjustment costs, some key determinants of exit behavior.
The purpose of this paper is to discuss three main issues concerning (mainly) developing country experiences with foreign banks. First, we look at the reasons as to why banks are seen to go multinational. Second, we evaluate some of the major concerns countries seem to have when contemplating issuance of permission for foreign bank entry or even at a later stage. Third, we focus on some of the tangible and intangible benefits accruing to countries from significant foreign bank presence in the domestic banking industry.
The nature of our work is empirical documentation and compilation of evidence on all these above mentioned issues from readily accesible sources. A few caveats are in order here. First, we concentrate only on multinational banks chartered in a developed country i.e we do not look into country experiences with foreign banks from developing countries. Second, we are indeed disadvantaged by a serious paucity and unavailability of relevant data over a wide range of countries. Consequently, our analysis will perforce be quite tentative and inconclusive. Third, we do not survey the theoretical literature on the subject.1 However, we do point out the theoretical underpinnings of the various arguments.
The aphorism, “As a man thinketh in his heart so is he,” not only embraces the whole of a man's being, but is so comprehensive as to reach out to every condition and circumstance of his life. A man is literally what he thinks, his character being the complete sum of all his thoughts.
