The purpose of this paper is to examine the effect of foreign bank entry on the performance of domestic banks and their ways of rooting. Both competition-efficiency and competition-inefficiency theories are used to show the entry process of foreign banks and their ability to realize performance. Empirically, we used 11 Tunisian banks during the period of 15 years, from 2003 to 2017. Our main result shows that there’s a significant impact of foreign bank presence on domestic banking performance in particular, on their competition through concentration. Foreign banks, among other things, can concentrate through specialization and diversification in the banking market, as well as domestic banks. Overall, our findings show that the entry of foreign banks and their capitalizations foster competition to increase the performance of the bank.

KEYWORDS: Foreign bank, Domestic bank, Performance, Efficiency, Concentration, Tunisia