Explaining the profitability of foreign banks in Shanghai

M. K. Leung, T. Young, D. Rigby

Research output: Journal article publicationJournal articleAcademic researchpeer-review

15 Citations (Scopus)

Abstract

This paper uses survival analysis to examine the factors determining the time taken for branches of foreign banks in Shanghai, China to make a positive rate of return after entering that market. Particular attributes of banks including the parent bank's size, early entry and the number of branches the bank has in China are found to reduce time to profitability. Market conditions in Shanghai, captured by levels of foreign direct investment and Eurodollar interest rates, are also found to have significant effects. A number of managerial implications are drawn from the analysis in light of the greater access to the Chinese banking markets following China's accession to the WTO. To ensure long-term profitability in Shanghai, the foreign bank needs to contain costs and risks in the new markets, formulate an effective market penetration strategy, identify appropriate customer target groups, attract businesses from firms of different countries, seek early entry and undertake more fee-income generating businesses.
Original languageEnglish
Pages (from-to)15-24
Number of pages10
JournalManagerial and Decision Economics
Volume24
Issue number1
DOIs
Publication statusPublished - 1 Jan 2003

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management
  • Management Science and Operations Research
  • Management of Technology and Innovation

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