The Determinants of Cross-Border Bank Shareholdings; an Analysis with Bank-Level Data from OECD Countries
AbstractTThis paper investigates which factors determine a bank's decision to expand its activities abroad and what determines its choice of the countries to invest in. The empirical analysis is conducted using firm-level data on foreign subsidiaries for a representative sample of nearly 2,500 OECD banks. The results show that the banks with cross-border shareholdings are larger and have headquarters in countries with a more developed and efficient banking market. They prefer to invest in countries where expected profits are larger, owing to higher expected economic growth and the prospect of reducing local banks' inefficiency. These factors are overall more important in banksÂ’ decisions than those related to the degree of openness of the origin country and its economic integration with the destination country.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 381.
Date of creation: Oct 2000
Date of revision:
banks; foreign banks; foreign direct investment;
Other versions of this item:
- Dario Focarelli & Alberto F. Pozzolo, 2000. "The determinants of cross-border bank shareholdings: an analysis with bank-level data from OECD countries," Proceedings 696, Federal Reserve Bank of Chicago.
- Focarelli, D. & Pozzolo, A.F., 2000. "The Determinants of Cross-Border Bank Share holdings: an Analysis with Bank-Level Data from OECD Countries," Papers 381, Banca Italia - Servizio di Studi.
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
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