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Where Do Banks Expand Abroad? An Empirical Analysis

Dario Focarelli and Alberto Franco Pozzolo
The Journal of Business
Vol. 78, No. 6 (November 2005), pp. 2435-2464
DOI: 10.1086/497052
Stable URL: http://www.jstor.org/stable/10.1086/497052
Page Count: 30
Subjects: Business Finance
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Abstract

This paper investigates the determinants of the patterns of banks' foreign investment using a unique database of 260 large banks from OECD countries. Consistent with previous research, we find that high integration between the home and destination countries affects the location choice. However, institutional characteristics and measures of potential profit opportunities in the destination countries are more important than economic integration; they affect differently the decision between opening a branch or acquiring a subsidiary. Profit opportunities are a key factor especially affecting subsidiaries, so are lower regulatory restrictions. On the other hand, financial centers attract branches but not subsidiaries.

Notes and References

This item contains 41 references.

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