Are International Banks Different? : Evidence on Bank Performance and Strategy
This paper provides evidence on how bank performance and strategies vary with the degree of bank internationalization, using data for 113 countries over 2000-15. The paper investigates whether international banks headquartered in developing countri...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/908851513693366704/Are-international-banks-different-evidence-on-bank-performance-and-strategy http://hdl.handle.net/10986/29078 |
| Summary: | This paper provides evidence on how bank
performance and strategies vary with the degree of bank
internationalization, using data for 113 countries over
2000-15. The paper investigates whether international banks
headquartered in developing countries behave and perform
differently from those headquartered in high-income
countries. The results show that, compared with domestic
banks, international banks have lower valuations and achieve
lower returns on equity in general. This suggests that, on
average, bank internationalization has progressed beyond the
point where it is in the interest of bank shareholders,
potentially because of corporate governance failures and
too-big-to-fail subsidies that accrue to large and complex
banks. In contrast, developing country international banks
seem to have benefited from internationalization compared
with their high-income counterparts. Furthermore, for
international banks headquartered in developing countries,
bank internationalization reduces the cyclicality of their
domestic credit growth with respect to domestic gross
domestic product growth, smoothing local downturns. In
contrast, if the international bank is from a high-income
country investing in a developing country, its lending is
relatively procyclical, which can be destabilizing. |
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