Foreign bank participation and access to credit across firms in developing countries

Combining responses from a survey of firms operating in 35 developing and transition economies with data on the degree of foreign bank presence across these countries, we investigate whether higher foreign bank participation improves the accessibility of external financing for firms. The results suggest that all enterprises, including small and medium-sized ones, report facing lower financing obstacles in countries having higher levels of foreign bank presence. The results are robust to the inclusion of many controls and to econometric adjustments for the potential endogeneity of foreign bank presence and for the likely correlation of responses across firms within countries. Journal of Comparative Economics 34 (4) (2006) 774–795.