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Should I stay or should I go? Bank productivity and internationalization decisions


Buch, Claudia M; Koch, Cathérine T; Koetter, Michael (2014). Should I stay or should I go? Bank productivity and internationalization decisions. Journal of Banking and Finance, 42:266-282.

Abstract

Differences in firm-level productivity explain international activities of non-financial firms quite well. We test whether differences in bank productivity determine international activities of banks. Based on a dataset that allows tracking banks across countries and across different modes of foreign entry, we model the ordered probability of maintaining a commercial presence abroad and the volume of banks’ international assets empirically. Our research has three main findings. First, more productive banks are more likely to enter foreign markets in increasingly complex modes. Second, more productive banks also hold larger volumes of foreign assets. Third, higher risk aversion renders entry less likely, but it increases the volume of foreign activities conditional upon entry.

Abstract

Differences in firm-level productivity explain international activities of non-financial firms quite well. We test whether differences in bank productivity determine international activities of banks. Based on a dataset that allows tracking banks across countries and across different modes of foreign entry, we model the ordered probability of maintaining a commercial presence abroad and the volume of banks’ international assets empirically. Our research has three main findings. First, more productive banks are more likely to enter foreign markets in increasingly complex modes. Second, more productive banks also hold larger volumes of foreign assets. Third, higher risk aversion renders entry less likely, but it increases the volume of foreign activities conditional upon entry.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:International banking, entry decisions, ordered probit, selection models
Language:English
Date:May 2014
Deposited On:10 Nov 2014 08:05
Last Modified:05 Apr 2016 18:29
Publisher:Elsevier
ISSN:0378-4266
Publisher DOI:https://doi.org/10.1016/j.jbankfin.2014.02.003

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