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The determinants of cross-border bank shareholdings: an analysis with bank-level data from OECD countries

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  • Dario Focarelli
  • Alberto F. Pozzolo

Abstract

TThis 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 Info

Paper provided by Federal Reserve Bank of Chicago in its series Proceedings with number 696.

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Length: 199-232
Date of creation: 2000
Date of revision:
Publication status: Published in Conference on Bank Structure and Competition (2000 : 36th) ; The changing financial industry structure and regulation : bridging states, countries, and industries
Handle: RePEc:fip:fedhpr:696

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Keywords: Bank mergers;

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References

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  1. Claessens, Stijn & Demirguc-Kunt, Asli & Huizinga, Harry, 1998. "How does foreign entry affect the domestic banking market?," Policy Research Working Paper Series 1918, The World Bank.
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Cited by:
  1. Van Horen, Neeltje, 2007. "Foreign banking in developing countries; origin matters," Emerging Markets Review, Elsevier, vol. 8(2), pages 81-105, May.
  2. Shen, Chung-Hua & Lin, Mei-Rong, 2011. "The determinants of cross-border consolidation in eight Asian countries: Before and after the Asian financial crisis," Journal of Multinational Financial Management, Elsevier, vol. 21(2), pages 89-105, April.
  3. Claudia M. Buch, 2000. "Information or Regulation: What Is Driving the International Activities of Commercial Banks?," Kiel Working Papers 1011, Kiel Institute for the World Economy.
  4. Joe Peek & Eric S. Rosengren, 2000. "Implications of the globalization of the banking sector: the Latin American experience," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 44(Jun), pages 145-185.
  5. Stijn Claessens & Neeltje Horen, 2014. "Location Decisions of Foreign Banks and Competitor Remoteness," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(1), pages 145-170, 02.
  6. Ricardo Correa, 2008. "Cross-border bank acquisitions: Is there a performance effect?," International Finance Discussion Papers 922, Board of Governors of the Federal Reserve System (U.S.).
  7. Jari Jumpponen & Kari Liuhto & Mart Sõrg & Vello Vensel, 2004. "Banks’ Internationalization: Estonian and Russian Banks’ Expansion to the Foreign Markets," Working Papers 109, Tallinn School of Economics and Business Administration, Tallinn University of Technology.
  8. Haselmann, Rainer, 2006. "Strategies of foreign banks in transition economies," Emerging Markets Review, Elsevier, vol. 7(4), pages 283-299, December.
  9. Arturo Galindo & Alejandro Micco & César Manuel Serra, 2003. "Better the Devil that You Know: Evidence on Entry Costs Faced by Foreign Banks," Research Department Publications 4313, Inter-American Development Bank, Research Department.
  10. Claudia M. Buch & Gayle L. DeLong, 2001. "Cross-Border Bank Mergers: What Lures the Rare Animal?," Kiel Working Papers 1070, Kiel Institute for the World Economy.
  11. Petrou, Andreas, 2007. "Multinational banks from developing versus developed countries: Competing in the same arena?," Journal of International Management, Elsevier, vol. 13(3), pages 376-397, September.
  12. Jean-Paul Abraham & Peter van Dijcke, 2002. "European Financial Cross-Border Consolidation: At the crossroads in Europe? By exception, evolution or revolution?," SUERF Studies, SUERF - The European Money and Finance Forum, number 22 edited by Morten Balling.
  13. Arturo Galindo & Alejandro Micco & César Manuel Serra, 2003. "Más vale malo conocido: elementos de juicio sobre los costos de ingreso que encaran los bancos extranjeros," Research Department Publications 4314, Inter-American Development Bank, Research Department.
  14. Luca Dedola & Eugenio Gaiotti & Luca Silipo, 2004. "Money Demand in theEuroArea: Do National Differences Matter?," Macroeconomics 0404019, EconWPA, revised 24 Apr 2004.
  15. Claessens, Stijn & Van Horen, Neeltje, 2013. "Impact of Foreign Banks," Journal of Financial Perspectives, EY Global FS Institute, vol. 1(1), pages 29-42.
  16. Ricardo Correa, 2009. "Cross-Border Bank Acquisitions: Is there a Performance Effect?," Journal of Financial Services Research, Springer, vol. 36(2), pages 169-197, December.
  17. 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.
  18. Ralph de Haas, 2006. "Monitoring Costs and Multinational-Bank Lending," DNB Working Papers 088, Netherlands Central Bank, Research Department.
  19. Schertler, Andrea & Tykvová, Tereza, 2006. "Rivals or partners? Evidence from Europe's international private equity deals," ZEW Discussion Papers 06-91, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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