Why Do Banks Go Abroad?—Evidence from German Data

Abstract

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

“…and 'Are decisions to engage in FDI and to provide crossborder financial services linked?' In particular, we can test whether FDI and cross-border services are substitutes or complements, which is a recurrent issue in the literature on multinational firms (see, for example, Brainard 1997, Markusen and Venables 1998, 2000.…”

“…There is evidence on the foreign activities of US financial institutions (Goldberg andJohnson 1990, Sagari 1992), on foreign banks in the United States (Goldberg and Saunders 1981, Goldberg and Grosse 1994, Molyneux et al 1998, on Japanese banks abroad (Yamori 1998), on foreign banks in the UK (Fisher and Molyneux 1996) and on German banks (Buch 2000).…”

Distance and International Banking

“…Buch (2000) uses the same dataset which will be employed below to analyze the importance of regulations versus information costs for banks' international asset choices. Information costs as proxied through distance, the presence of a common language, and a common legal system are shown to have an impact on international investment decisions of banks.…”

Do Reforms in Transition Economies Affect Foreign Bank Entry?

“…Nevertheless, several reasons are put forward in the literature (Buch, 2000, Focarelli and Pozzolo, 2000, Konopielko, 1999. The main reason for foreign bank entry seems to be the 'follow the customer' principle, otherwise called the defensive expansion hypothesis (Williams, 2002).…”

“…Given the high and growing share of foreign bank ownership, there is a growing need for studies on the reasons for foreign bank entry in transition economies. The existing literature on foreign bank entry mainly deals with Western European countries, or with the US (Buch, 2000). There are only a few studies focusing on transition economies, but they only consider one country, or a small group of countries (e.g.…”