Influence of Foreign Bank Presence on the Level of Crediting in Ukraine

INFLUENCE OF FOREIGN BANK PRESENCE ON THE LEVEL OF CREDITING IN UKRAINE

by

Iaroslava Suchok

A thesis submitted in partial fulfillment of the requirements for the degree of

MA in Economics

Kyiv School of Economics

2009

Approved by

Tom Coupé, KSE Program Director

Date

Kyiv School of Economics

Abstract

INFLUENCE OF FOREIGN BANK PRESENCE ON THE LEVEL OF CREDITING IN UKRAINE

by Iaroslava Suchok

KSE Program Director: Tom Coupé

Using individual banking data for Ukraine in 3rd quarter 2002 - 4th quarter 2008 period, this research evaluates the impact of the presence of foreign banks on the total amount of credits issued by banks in Ukraine. It was found that foreign bank presence has positive effect on amount of credits issued by banks. Although the inclusion year 2008 have not change the impact of the presence of foreign banks on the total amount of credits issued by Ukrainian banks, overall the model has structural when 2008 appears in data that can be attributed to negative developments and crisis.

TABLE OF CONTENTS

LIST OF FIGURES AND TABLES ii

CHAPTER 1. INTRODUCTION 1

CHAPTER 2. LITERATURE REVIEW 4

CHAPTER 3. THEORETICAL BASE 10

CHAPTER 4. METHODOLOGY AND DATA .................................13

CHAPTER 5. ESTIMATION RESULTS .......................................................................21

CHAPTER 6. CONCLUSIONS ............................................................................... ................25

BIBLIOGRAPHY..........................................................................................................................27

APPENDICES................................................................................................................................3

LIST OF FIGURES

Number Page

Figure 1 Structure of credits by type of ownership 19

LIST OF TABLES

Number Page

Table 1 Possible equilibrium in adverse selection problem 12

Table 2 Ownership structure of the foreign owned banks

in Ukraine (as of 01.01.2009) 18

Table 3 Empirical results for influence of foreign bank

presence on crediting before 2008 22

Table 4 Empirical results for influence of foreign bank

presence on crediting including year 2008 24

Table 1A Summary statistics 3

Table 2A Empirical results for influence of foreign bank

presence on crediting including year 2008 3

Table 3A Hausman test 4

Table 4A Breuch-Pagan test 4

Table 5A the Market share of