What Drives Foreign Expansion of the Top 100 Multinational Banks? The Role of the Credit Reporting System
44 Pages Posted: 24 Aug 2009 Last revised: 9 Nov 2009
Date Written: November 7, 2009
Abstract
This study explores how information costs in host countries affected foreign expansion of the top 100 multinational banks from 2001 to 2007. Indices representing characteristics of credit reporting systems are used to proxy for banks' information costs in 103 host countries. We find that banks are more likely to enter or expand operations in countries where a credit bureau exists and where credit reports shared within the credit system are of better quality in terms of timeliness, accuracy, and completeness. Overall, our results indicate that banks are attracted to countries where the credit reporting system helps reduce banks' information costs.
Keywords: Banks, Credit Information Sharing, Foreign Expansion, Location Decision
JEL Classification: G21, D82, F23
Suggested Citation: Suggested Citation
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