Cross-border bank mergers: What lures the rare animal?

Buch, Claudia M.; Delong, Gayle

doi:10.1016/j.jbankfin.2003.08.002

Cited by 236 publications

(126 citation statements)

References 32 publications

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“…Barth et al (2001) have compiled a comprehensive dataset on banking supervision around the globe. From this database, we follow Buch and De Long (2003) and construct two indices which capture the power of the banking supervision authorities to intervene in banks (supervision) and the transparency of the supervisory system (transparency). Both indicators assume higher values as the quality of the supervisory system improves, ie as supervisory power and transparency increase.…”

Section: Country-level Explanatory Variablesmentioning

confidence: 99%

Clustering or Competition? The Foreign Investment Behaviour of German Banks

Lipponer

Buch

2004

SSRN Journal

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Abstract:The presence of other firms in a foreign market can have a double-edged effect on the profitability of new entrants. Firstly, a larger presence of other firms implies more competition and thus lowers the earnings prospects of new entrants. Secondly, there might be positive spill-over effects between the activities of new and old entrants, which can lead to clustering effects. Such clustering of firms in foreign markets has been documented in the empirical literature on foreign direct investment (FDI) of nonfinancial firms, but little evidence is available for banks. This paper analyses whether banks have a tendency to cluster abroad and whether smaller banks in particular invest in markets where other banks are already present. We use firm-level evidence on the foreign direct investments of German banks for the period 1997-2000 to test this hypothesis. Our results suggest that German banks are indeed more active in markets in which other German banks are already present. However, once we control for countryfixed effects, the negative competition effect dominates. Keywords:international banking, clustering, foreign direct investment Nichttechnische Zusammenfassung

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Section: Country-level Explanatory Variablesmentioning

confidence: 99%

Clustering or Competition? The Foreign Investment Behaviour of German Banks

Lipponer

Buch

2004

SSRN Journal

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“…Barth et al (2001) have compiled a comprehensive dataset on banking supervision around the globe. From this dataset, we follow Buch and DeLong (2003) All data which are in foreign currencies are converted into euro. For 1997 and 1998, foreign currencies are first converted into DM and subsequently into euro using the fixed conversion rate for the Deutsche Mark, ie DM1.95583/€1.…”

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confidence: 99%

FDI Versus Cross-Border Financial Services: The Globalisation of German Banks

Buch

Lipponer

2004

SSRN Journal

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Abstract:The choice between foreign direct investment (FDI) and exports has been a recurrent theme in the literature on international trade, yet few studies have analysed this choice at the level of the individual firm. This paper uses a new dataset to study the FDIversus-exports decision for banks. We use data on the foreign direct investment stocks and the cross-border provision of financial services of German banks for the period 1997-2000 to describe the regional pattern of banks' international activities. We find that country-and bank-specific variables capturing size have a major impact on banks' foreign activities. The results are consistent with the hypothesis that the realisation of economies of scale and the provision of trade-related finance shape globalisation patterns. Greater cultural and geographical distance, by contrast, potentially limit the international expansion of banks. Our results also suggest that FDI and cross-border services are complements rather than substitutes. Keywords:international banking, gravity equations, foreign direct investment, cross-border financial services JEL-Classification: F0, F21 Non Technical SummaryThis paper provides a first comprehensive assessment of the globalisation of the German banking industry based on bank-level data. By combining data from different sources, we draw a fairly complete picture of the foreign direct investments and the cross-border provision of financial services of German banks. The data we use covers the second half of the 1990s, ie a period in which the globalisation of the German banking industry was fully under way. In addition, we disentangle the effects of bank-and country-level explanatory variables, of regulatory and cultural factors, and of factors capturing market size on the internationalisation of German banks. Moreover, having access to data on all German banks, we can separate factors that influence the decision of banks to go abroad from those affecting the actual volume of international business. With regard to the latter, we find that the determinants of entry and of the volume of activity are qualitatively the same.In terms of robustness, we obtain the most stable results for variables that account for size at the bank level and at the country level. More internationally oriented and larger banks also have the largest foreign investments abroad. Larger markets (in terms of GDP) and a large volume of bilateral trade between Germany and a host country promote FDI. Hence, the intention to realise economies of scale is an important motive behind the international expansion of German banks. Moreover, the impact of the variables capturing bank and market size is the same across the different forms of foreign activities that we consider, ie FDI and cross-border financial services. In particular, the impact of trade is positive throughout. The provision of trade-related financial services thus remains a major driving force behind the globalisation of German banks. Besides, more profitable banks are more active internationally, w...

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“…Using a sample of M&As in the banking industry, Buch and Delong (2004) find that cross-border M&As are more likely to occur between countries with the same origin of law. I expect the same finding to be generalizable to the cross-border M&As in other industries.…”

Section: Other Country-specific Variablesmentioning

confidence: 99%

Institutional Investors and Cross-Border Mergers and Acquisitions: the 2000-2012 Period

Yang

2016

SSRN Journal

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Cross-border bank mergers: What lures the rare animal?

Cited by 236 publications

References 32 publications

Clustering or Competition? The Foreign Investment Behaviour of German Banks

Clustering or Competition? The Foreign Investment Behaviour of German Banks

FDI Versus Cross-Border Financial Services: The Globalisation of German Banks

Institutional Investors and Cross-Border Mergers and Acquisitions: the 2000-2012 Period

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