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How Does Regulation Affect the Organizational Form of Banks' Presence in Developing and Developed Countries?

Author

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  • Annick Pamen Nyola

    () (LAPE - Laboratoire d'Analyse et de Prospective Economique - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société - UNILIM - Université de Limoges)

  • Alain Sauviat

    () (LAPE - Laboratoire d'Analyse et de Prospective Economique - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société - UNILIM - Université de Limoges)

  • Amine Tarazi

    () (LAPE - Laboratoire d'Analyse et de Prospective Economique - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société - UNILIM - Université de Limoges)

Abstract

Using a unique hand-collected dataset of 1,251 European Union banks and their 20,850 foreign affiliates hosted in 154 countries, this paper investigates how both host country and home country regulation affects their decision on how to go abroad to both developed and developing countries. Controlling for various factors, we find that host country banking regulation is an important factor in explaining organizational form (subsidiaries versus branches), but that such a factor is strongly influenced by the level of development of the host country. While banks are very careful in limiting their expansion to the relatively safest world countries, they are more likely to open branches rather than subsidiaries in countries with stringent activity restrictions and capital requirements; especially when they are relatively less efficient. Additionally, retail-oriented banks tend to prefer to operate subsidiaries in the most developed countries and competitive markets.

Suggested Citation

  • Annick Pamen Nyola & Alain Sauviat & Amine Tarazi, 2017. "How Does Regulation Affect the Organizational Form of Banks' Presence in Developing and Developed Countries?," Working Papers hal-01369658, HAL.
  • Handle: RePEc:hal:wpaper:hal-01369658
    DOI: 10.2139/ssrn.2841608
    Note: View the original document on HAL open archive server: https://hal-unilim.archives-ouvertes.fr/hal-01369658v3
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    Keywords

    Bank regulation; Internationalization; Foreign branch; Foreign subsidiary; Cross-border entries; Economic development We are very grateful to;

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