Foreign Bank Participation in Mexico: A performance analysis for the period 2000-2017

University essay from Lunds universitet/Ekonomisk-historiska institutionen

Abstract: Many economists agree that financial development and economic growth have a positive relationship, that financial structures have been critical for many countries to achieve modern economic growth. In the past decades, foreign investment has become more widespread in the entrepreneurial world, and the banking sector has not been an exception. Mexico experimented during the late 1990’s an unprecedented case of foreign investment in its banking sector that triggered many discussions regarding its consequences to financial development and economic growth. Several investigations were performed around the topic, and most of the conclusions suggest that bank performance declined after foreign bank participation. Nonetheless, previous studies were performed for a period in which the financial market conditions might not have been the appropriate ones since the country had recently experienced a financial crisis. Throughout this paper, research using similar procedures as previous ones but with recent data is presented and discussed. The outcome denotes that the overall performance of foreign banks in Mexico did not decline. Additionally, the evidence bestows that there are many similarities between foreign and domestic bank performance trends, suggesting that the origin of a bank’s ownership has not been determinant for different patterns of behavior.

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