Policy makers who decide to liberalize foreign bank entry frequently put limitations on the mode of entry. We study how different entry modes affect the lending rates of foreign and domestic banks. In our model, the mode of entry determines whether a foreign bank inherits a customer base. This,...

In transition countries, banks often fail to take action against loan defaulters. Using a model of the bank-firm relationship, we study the trade-off a bank faces when having defaulting firms declared bankrupt. First, the bank receives a payoff if a firm is liquidated. Second, it provides...