Kiel Working Papers, Kiel Institute for World Economics
No 948:
Why Do Banks Go Abroad? ; Evidence from German Data
Claudia M. Buch
Abstract: This paper provides empirical evidence on the determinants
of foreign activities of German banks. We use regionally disaggregated
panel data for the years 198198 and distinguish foreign direct investment
from total foreign assets of domestic banks, of their foreign branches and
their subsidiaries. Foreign activities are found to be positively related
to demand conditions on the local market, foreign activities of German
firms, and the presence of financial centers. This supports the hypothesis
that German banks follow their customers abroad. Exchange rate volatility
has some negative impact. EU membership and the abolition of capital
controls seem to have exerted a greater influence on foreign assets than on
FDI of German banks, thus weakly supporting the hypothesis that the two are
substitutes.
Keywords: foreign activities of commercial banks, Germany, panel cointegration; (follow links to similar papers)
JEL-Codes: F21; F23; G21; (follow links to similar papers)
38 pages, September 1999
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