Why Do Banks Go Abroad? Evidence from German Data

Posted: 19 Jul 2000

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. 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.

JEL Classification: G21

Suggested Citation

Buch, Claudia M., Why Do Banks Go Abroad? Evidence from German Data. Available at SSRN: https://ssrn.com/abstract=234301

Claudia M. Buch (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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