Multinational Banks and the Performance of Their Subsidiaries Abroad

27 Pages Posted: 26 Oct 2010 Last revised: 6 Aug 2011

See all articles by Oskar Kowalewski

Oskar Kowalewski

IESEG School of Management; LEM - CNRS 9221

Multiple version iconThere are 2 versions of this paper

Date Written: October 25, 2010

Abstract

This paper investigates whether foreign subsidiaries outperform their parent banks in terms of profitability and what determines this outcome. Using a sample of multinational banks and their subsidiaries in a large number of countries, this study shows that, on average, foreign subsidiaries are less profitable than their parent banks. However, the results show that foreign subsidiaries tend to perform better than their parent banks if they are well capitalized, have low overhead costs and loss low provision. I find also show that foreign subsidiaries tend to perform better than their parent banks if the latter are underperforming in the home market. While, the legal distance between host country and host country is an important determinant of the profitability of the subsidiary in relation to its parent bank, to a lesser extent, are the host market’s characteristics. Finally, foreign banks are more likely to outperform parent banks in developing markets than in developed countries. However, different bank and host country determinants influence the profitability of the subsidiaries in these countries.

Keywords: international banking, foreign banks, subsidiary, performance

JEL Classification: F21, F23, G21

Suggested Citation

Kowalewski, Oskar, Multinational Banks and the Performance of Their Subsidiaries Abroad (October 25, 2010). Available at SSRN: https://ssrn.com/abstract=1697852 or http://dx.doi.org/10.2139/ssrn.1697852

Oskar Kowalewski (Contact Author)

IESEG School of Management ( email )

1 Parvis de La Défense
Socle de la Grande Arche
Paris La Défense cedex, 92044
France

HOME PAGE: http://www.ieseg.fr/en/faculty-and-research/professor/?id=1740

LEM - CNRS 9221 ( email )

Lille
France

HOME PAGE: http://lem.cnrs.fr/

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