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Migration and the retail banking industry: an examination of immigrants' bank nationality choice in Germany

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  • Fabian Gleisner
  • Andreas Hackethal
  • Christian Rauch

Abstract

We study the choice of bank nationality by foreign-born retail banking customers in the context of bank globalization. We argue theoretically that banks enter foreign markets to follow their non-corporate customers and thereby are able to exploit competitive advantages over domestic banks. Using detailed survey data on more than 1000 Turkish immigrants in Germany, we find that product differentiation explains the choice of a home nation bank and that ethnic origin in itself provides the strongest comparative advantage for foreign banks. We find evidence for a persistent 'home-bias' of customers with an immigration background even with increasing integration into the host country's culture. This result may be surprising given that a systematic difference in the choice of bank nationality should not be observable with more integrated immigrants. Our results contribute to the existing economic research on multinational bank expansion by providing insights into bank globalization as an accompaniment to labor market internationalization.

Suggested Citation

  • Fabian Gleisner & Andreas Hackethal & Christian Rauch, 2010. "Migration and the retail banking industry: an examination of immigrants' bank nationality choice in Germany," The European Journal of Finance, Taylor & Francis Journals, vol. 16(5), pages 459-480.
  • Handle: RePEc:taf:eurjfi:v:16:y:2010:i:5:p:459-480
    DOI: 10.1080/13518470903314410
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    References listed on IDEAS

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    1. M. Piracha & Y. Zhu, 2012. "Precautionary savings by natives and immigrants in Germany," Applied Economics, Taylor & Francis Journals, vol. 44(21), pages 2767-2776, July.
    2. Mathias Sinning, 2011. "Determinants of savings and remittances: empirical evidence from immigrants to Germany," Review of Economics of the Household, Springer, vol. 9(1), pages 45-67, March.
    3. Stijn Claessens & Neeltje Van Horen, 2014. "Location Decisions of Foreign Banks and Competitor Remoteness," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(1), pages 145-170, February.
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    Cited by:

    1. Lee, Chien-Chiang & Chiu, Yi-Bin, 2016. "Globalization and insurance activity: Evidence on the industrial and emerging countries," The North American Journal of Economics and Finance, Elsevier, vol. 36(C), pages 328-349.

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