The Impact of foreign banks entry on financial development in Lebanon for the period 1995-2014

Abstract

This study investigates the impact of foreign banks entry on financial development in Lebanon for the period between 1995 and 2014. We use the number of foreign banks to total banks as measure of foreign banks entry and liquid liabilities, private credit by deposit monetary institutions and domestic credit to private sector as measures of financial development. Liquid liabilities represent the size of the financial sector, while private credit by deposit monetary institutions and domestic credit to private sector represent the activity of the financial sector. We find positive real effect of the level of foreign banks entry on financial development. This result suggests that foreign banks entry play a crucial role in developing the financial sector in Lebanon for the period between 1995 and 2014 . By contrast, the results of the present study contradict with other studies that claim that foreign banks entry have negative effects on financial development in developing countries .