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Clustering or Competition? The Foreign Investment Behavior of German Banks

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Author Info
Claudia M. Buch (University of Tübingen and Deutsche Bundesbank)
Alexander Lipponer (University of Tübingen and Deutsche Bundesbank)

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Abstract

Banks often concentrate their foreign direct investment (FDI) in certain countries. This clustering of activities could reflect either the attractiveness of a particular country or agglomeration effects. To find out which of the two phenomena dominates, we need to control for country-specific factors. We use new bank-level data on German banks’ FDI for the 1996 - 2003 period.We test whether the presence of other banks has a positive impact on the entry of new banks. Once we control for the attractiveness of a country through fixed effects, the negative impact of competition dominates. Hence, pure clustering effects are rather unimportant.

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Publisher Info
Article provided by International Journal of Central Banking in its journal International Journal of Central Banking.

Volume (Year): 2 (2006)
Issue (Month): 2 (May)
Pages:
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Handle: RePEc:ijc:ijcjou:y:2006:q:2:a:5

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Find related papers by JEL classification:
F0 - International Economics - - General
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Barron, John M & Valev, Neven T, 2000. "International Lending by U.S. Banks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 357-81, August.
  2. Barry, Frank & Görg, Holger & Strobl, Eric, 2001. "Foreign Direct Investment, Agglomerations and Demonstration Effects: An Empirical Investigation," CEPR Discussion Papers 2907, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  3. Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August. [Downloadable!] (restricted)
  4. Focarelli, Dario & Pozzolo, Alberto Franco, 2001. "The patterns of cross-border bank mergers and shareholdings in OECD countries," Journal of Banking & Finance, Elsevier, vol. 25(12), pages 2305-2337, December. [Downloadable!] (restricted)
  5. Angela Chang & Shubham Chaudhuri & Jith Jayaratne, 1997. "Rational herding and the spatial clustering of bank branches: an empirical analysis," Research Paper 9724, Federal Reserve Bank of New York. [Downloadable!]
  6. Head, Keith & Ries, John & Swenson, Deborah, 1995. "Agglomeration benefits and location choice: Evidence from Japanese manufacturing investments in the United States," Journal of International Economics, Elsevier, vol. 38(3-4), pages 223-247, May. [Downloadable!] (restricted)
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  7. Berger, Allen N. & Buch, Claudia M. & DeLong, Gayle & DeYoung, Robert, 2004. "Exporting financial institutions management via foreign direct investment mergers and acquisitions," Journal of International Money and Finance, Elsevier, vol. 23(3), pages 333-366, April. [Downloadable!] (restricted)
  8. Crozet, Matthieu & Mayer, Thierry & Mucchielli, Jean-Louis, 2003. "How do Firms Agglomerate? A Study of FDI in France," CEPR Discussion Papers 3873, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Investment in the European Union," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 959-972, 01. [Downloadable!] (restricted)
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  10. Robert C. Feenstra & James R. Markusen & Andrew K. Rose, 2001. "Using the gravity equation to differentiate among alternative theories of trade," Canadian Journal of Economics, Canadian Economics Association, vol. 34(2), pages 430-447, May. [Downloadable!] (restricted)
  11. Buch, Claudia M. & Lipponer, Alexander, 2004. "FDI versus cross-border financial services : The globalisation of German banks," Discussion Paper Series 1: Economic Studies 2004,05, Deutsche Bundesbank, Research Centre. [Downloadable!]
  12. Claessens, Stijn & Demirguc-Kunt, Asl[iota] & Huizinga, Harry, 2001. "How does foreign entry affect domestic banking markets?," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 891-911, May. [Downloadable!] (restricted)
  13. Allen N. Berger & Qinglei Dai & Steven Ongena & David C. Smith, 2002. "To what extent will the banking industry be globalized? a study of bank nationality and reach in 20 European nations," International Finance Discussion Papers 725, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  14. Barth, James R. & Caprio Jr, Gerard & Levine, Ross, 2001. "The regulation and supervision of banks around the world - a new database," Policy Research Working Paper Series 2588, The World Bank. [Downloadable!]
  15. Buch, Claudia M. & DeLong, Gayle, 2004. "Cross-border bank mergers: What lures the rare animal?," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2077-2102, September. [Downloadable!] (restricted)
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  16. Peter Egger, . "An Econometric View on the Estimation of Gravity Models and the Calculation of Trade Potentials," WIFO Working Papers 141, WIFO. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Claudia M. Buch & Gayle L. DeLong, 2008. "Banking Globalization: International Consolidation and Mergers in Banking," IAW Discussion Papers 38, Institut für Angewandte Wirtschaftsforschung (IAW). [Downloadable!]
  2. Wezel, Torsten, 2004. "Foreign Bank Entry into Emerging Economies: An Empirical Assessment of the Determinants and Risks Predicated on German FDI Data," Discussion Paper Series 1: Economic Studies 2004,01, Deutsche Bundesbank, Research Centre. [Downloadable!]
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