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The determinants of U.S. banks’ international activities

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  • Temesvary, Judit

Abstract

This paper develops a model and structural dynamic estimation of bank behavior to map the relationship between U.S. banks’ choices of foreign banking activities, and bank and foreign market traits. This estimation framework is applied to a unique bank-level dataset compiled from regulatory sources, covering U.S. banks’ foreign activities in 83 host markets over the 2003–2013 period. Bank traits are better able to explain the evolving patterns of foreign banking than host market characteristics. After controlling for these traits, the post-financial crisis period shows a structural shift away from cross-border claims towards foreign affiliate activities. Structural estimates of foreign market entry costs and regulatory attitudes towards risk are derived. Simulation exercises confirm the strong impact of banks’ and regulators’ risk stance on bank profits and portfolio composition.

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  • Temesvary, Judit, 2014. "The determinants of U.S. banks’ international activities," Journal of Banking & Finance, Elsevier, vol. 44(C), pages 233-247.
    • Handle: RePEc:eee:jbfina:v:44:y:2014:i:c:p:233-247
    DOI: 10.1016/j.jbankfin.2014.04.014
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    Cited by:

    1. Julia Merz & Michael Overesch & Georg Wamser, 2015. "Tax vs. Regulation Policy and the Location of Financial Sector FDI," CESifo Working Paper Series 5500, CESifo.
    2. Owen, Ann L. & Temesvary, Judit, 2012. "Foreign lending, local lending, and economic growth," MPRA Paper 39978, University Library of Munich, Germany.
    3. Temesvary, Judit & Ongena, Steven & Owen, Ann L., 2018. "A global lending channel unplugged? Does U.S. monetary policy affect cross-border and affiliate lending by global U.S. banks?," Journal of International Economics, Elsevier, vol. 112(C), pages 50-69.
    4. Matthias Efing & Stefan Goldbach & Volker Nitsch, 2018. "Freeze! Financial Sanctions and Bank Responses," CESifo Working Paper Series 7424, CESifo.
    5. Owen, Ann L. & Temesvary, Judit, 2014. "Heterogeneity in the growth and finance relationship: How does the impact of bank finance vary by country and type of lending?," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 275-288.
    6. Frame, W. Scott & Mihov, Atanas & Sanz, Leandro, 2020. "Foreign Investment, Regulatory Arbitrage, and the Risk of U.S. Banking Organizations," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 55(3), pages 955-988, May.
    7. Merz, Julia & Overesch, Michael & Wamser, Georg, 2017. "The location of financial sector FDI: Tax and regulation policy," Journal of Banking & Finance, Elsevier, vol. 78(C), pages 14-26.
    8. Matthias Efing & Stefan Goldbach & Volker Nitsch & Manju Puri, 2023. "Freeze! Financial Sanctions and Bank Responses," The Review of Financial Studies, Society for Financial Studies, vol. 36(11), pages 4417-4459.
    9. Owen, Ann L. & Temesvary, Judit, 2014. "What determines cross-border bank lending and risk-taking? The effects of culture, geography, institutions, and information exchange," MPRA Paper 57692, University Library of Munich, Germany.
    10. Temesvary, Judit & Wei, Andrew, 2024. "Domestic lending and the pandemic: How does banks’ exposure to COVID-19 abroad affect their lending in the United States?," Journal of International Money and Finance, Elsevier, vol. 143(C).
    11. Judit Temesvary, 2018. "The Role Of Regulatory Arbitrage In U.S. Banks' International Flows: Bank‐Level Evidence," Economic Inquiry, Western Economic Association International, vol. 56(4), pages 2077-2098, October.
    12. Temesvary, Judit, 2015. "Foreign activities of U.S. banks since 1997: The roles of regulations and market conditions in crises and normal times," Journal of International Money and Finance, Elsevier, vol. 56(C), pages 202-222.
    13. Horacio Sapriza & Judit Temesvary, 2019. "How Does the Strength of Monetary Policy Transmission Depend on Real Economic Activity?," Finance and Economics Discussion Series 2019-023, Board of Governors of the Federal Reserve System (U.S.).

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    More about this item

    Keywords

    International banking; Bank behavior; Affiliate lending; Cross-border lending; Bank regulation;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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