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Choice of scale by banks in financial centers

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  • Gulamhussen, Mohamed Azzim
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    Abstract

    The paper develops a theoretical link between foreign investment, scale and reversibility in the banking industry. This link is used to formulate hypotheses that are empirically examined with a unique data set collected through interviews with senior managers of multinational banks in London. Findings reveal that banks do not set up large operations to service domestic customers or get a foothold, but do so to create hubs. Banks with confident beliefs set up large operations, and use large offices to lock themselves into the market. These results explain the cross-sectional variation in the size of foreign investments in the industry. Robustness checks do not reveal presence of influential data points; regressions are stable over time and consistent with what we know from secondary samples.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Business Review.

    Volume (Year): 16 (2007)
    Issue (Month): 4 (August)
    Pages: 507-525

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    Handle: RePEc:eee:iburev:v:16:y:2007:i:4:p:507-525

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    Related research

    Keywords: International investment Financial institutions and services;

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