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Why Do Banks Go Abroad?—Evidence from German Data

Why Do Banks Go Abroad?—Evidence from German Data This paper provides empirical evidence on the determinants of foreign activities of German banks. We use regionally disaggregated panel data for the years 1981–98 and distinguish foreign direct investment from total foreign assets of domestic banks, of their foreign branches and of 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Financial Markets, Institutions & Instruments Wiley

Why Do Banks Go Abroad?—Evidence from German Data

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References (37)

Publisher
Wiley
Copyright
New York University Salomon Center
ISSN
0963-8008
eISSN
1468-0416
DOI
10.1111/1468-0416.00035
Publisher site
See Article on Publisher Site

Abstract

This paper provides empirical evidence on the determinants of foreign activities of German banks. We use regionally disaggregated panel data for the years 1981–98 and distinguish foreign direct investment from total foreign assets of domestic banks, of their foreign branches and of 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.

Journal

Financial Markets, Institutions & InstrumentsWiley

Published: Feb 1, 2000

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