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Why Do Banks Go Abroad?—Evidence from German Data

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  • Claudia M. Buch

Abstract

This paper provides empirical evidence on the determinants of foreign activities of German banks. We use regionally disaggregated panel data for the years 1981–98 and distinguish foreign direct investment from total foreign assets of domestic banks, of their foreign branches and of their subsidiaries. Foreign activities are found to be positively related to demand conditions on the local market, foreign activities of German firms, and the presence of financial centers. This supports the hypothesis that German banks follow their customers abroad. Exchange rate volatility has some negative impact. EU membership and the abolition of capital controls seem to have exerted a greater influence on foreign assets than on FDI of German banks, thus weakly supporting the hypothesis that the two are substitutes.

Suggested Citation

  • Claudia M. Buch, 2000. "Why Do Banks Go Abroad?—Evidence from German Data," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 9(1), pages 33-67, February.
    • Handle: RePEc:wly:finmar:v:9:y:2000:i:1:p:33-67
    DOI: 10.1111/1468-0416.00035
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    Cited by:

    1. Cerutti, Eugenio & Casanova, Catherine & Pradhan, Swapan-Kumar, 2023. "Banking across borders: Are Chinese banks different?," Journal of Banking & Finance, Elsevier, vol. 154(C).
    2. Mitchell Berlin, 2015. "New rules for foreign banks: what's at stake?," Business Review, Federal Reserve Bank of Philadelphia, issue Q1, pages 1-10.
    3. Catherine Casanova & Mr. Eugenio M Cerutti & Swapan-Kumar Pradhan, 2024. "Chinese Banks and Their EMDE Borrowers: Have Their Relationships Changed in Times of Geoeconomic Fragmentation?," IMF Working Papers 2024/205, International Monetary Fund.
    4. Marano, Angelo, 2000. "Beyond The London-Frankfurt Dichothomy. What Space For The Other European Financial Centers?," ERSA conference papers ersa00p407, European Regional Science Association.
    5. Shintaro Hamanaka, 2011. "Examination of the Singapore Shift in Japan's Foreign Direct Investment in Services in ASEAN," ADBI Working Papers 267, Asian Development Bank Institute.
    6. Mutinelli, Marco & Piscitello, Lucia, 2001. "Foreign direct investment in the banking sector: the case of Italian banks in the '90s," International Business Review, Elsevier, vol. 10(6), pages 661-685, December.
    7. Vincent Tawiah & Babajide Oyewo, 2025. "The effect of IFRS adoption on bank internationalisation," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(1), pages 855-878, January.

    More about this item

    JEL classification:

    • 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
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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