Why Do Foreign Banks Withdraw from Other Nations?

Posted: 25 May 2009

See all articles by Aneta Hryckiewicz

Aneta Hryckiewicz

Economic Institute for Empirical Analysis, Kozminski University

Oskar Kowalewski

IESEG School of Management; LEM - CNRS 9221

Multiple version iconThere are 2 versions of this paper

Date Written: April 1, 2009

Abstract

This paper describes the trends in foreign bank ownership across the world and presents, for the first time, empirical evidence on the causes of foreign banks’ withdrawal from other nations. Using maximum likelihood estimation techniques and data on 81 closed foreign bank subsidiaries across 37 countries during 1999-2006, we show that problems encountered by the subsidiaries were not the main cause of divestment by the parent banks. Based on data for the parent banks of the closed subsidiaries, our results show that those banks reported significant financial weakness one year prior to the closing of the international operation. We therefore assume that a multinational bank’s decision to close a subsidiary in another nation is caused by problems in the home country rather than by weak performance of the subsidiary.

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Keywords: foreign banks, subsidiary, ownership, performance

JEL Classification: G21, G34, F2

Suggested Citation

Hryckiewicz, Aneta and Kowalewski, Oskar, Why Do Foreign Banks Withdraw from Other Nations? (April 1, 2009). CAREFIN Research Paper No. 6/09, Available at SSRN: https://ssrn.com/abstract=1409595

Aneta Hryckiewicz

Economic Institute for Empirical Analysis, Kozminski University ( email )

ul. Jagiellonska 57/59
Warsaw, 03-303
Poland
(22) 519 21 69 (Phone)

Oskar Kowalewski (Contact Author)

IESEG School of Management ( email )

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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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