Contract rights and risk aversion
Subtitle: foreign banks and the Mexican economy, 1997-2004
By: Stephen Haber, Aldo Musacchio
Contributors: Musacchio, Aldo; Harvard Business School. Division of Research
Edition: Rev.
Series: Working paper / Harvard Business School -- 05-025; Working paper (Harvard Business School) -- 05-025
Publisher: Harvard Business School
Published: 2004
Place of publication: Boston
Language: eng
Number of pages: 49
Description: In 1997 Mexico allowed foreign banks unrestricted entry to the market. What impact did foreign mergers and acquisitions have on Mexico's banks? We find that all banks in Mexico have become increasingly risk averse, and that foreign banks are even more so. Foreign banks grant less credit, screen loans more intensively, and charge lower interest rate spreads. The cause is Mexico's weak contract rights environment. One would normally associate risk aversion with lower profits. We find, however, that foreign banks are more profitable than domestically owned banks because their market power allows them to charge higher service fees than domestic banks.
Notes: Revision of: Foreign banks and the Mexican economy, 1997-2004. c2004.

"Revised February 2008"--Publisher's website, 2004-2005.

Includes bibliographical references.