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Why do Foreign Banks Withdraw from other Countries? A Panel Data Analysis


  • Aneta Hryckiewicz
  • Oskar Kowalewski


This paper describes the trends in foreign bank ownership across the world and presents, for the first time, empirical evidence of the causes of multinational banks’ exits from other countries. Using panel data for 149 closed or divested foreign bank subsidiaries across 54 countries from 1997 to 2009, we show that the problems encountered by subsidiaries were not the main cause of divestment by parent banks. Based on data for the parent banks of the closed subsidiaries, our results show that those parent banks reported significant financial weaknesses prior to closing their international operations. Therefore, we assume that a multinational bank’s decision to close or sell a subsidiary in another country is based mainly on problems in the home country, with a lesser factor being the weak performance of the foreign subsidiary.

Suggested Citation

  • Aneta Hryckiewicz & Oskar Kowalewski, 2010. "Why do Foreign Banks Withdraw from other Countries? A Panel Data Analysis," CESifo Working Paper Series 3006, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3006

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    References listed on IDEAS

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    Cited by:

    1. Jeon, Bang Nam & Olivero, María Pía & Wu, Ji, 2013. "Multinational banking and the international transmission of financial shocks: Evidence from foreign bank subsidiaries," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 952-972.
    2. Bang Nam Jeon & Maria Pia Olivero & Ji Wu, 2013. "Multinational Banking and Financial Contagion: Evidence from Foreign Bank Subsidiaries," Working Papers 052013, Hong Kong Institute for Monetary Research.

    More about this item


    foreign banks; subsidiary; divestment; performance;

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance


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