FDI versus exports: Evidence from German banks

Buch, Claudia M.; Lipponer, Alexander

doi:10.1016/j.jbankfin.2006.07.004

Cited by 94 publications

(49 citation statements)

References 22 publications

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“…While several papers consider the choice of banks between cross-border operations and FDI (see, e.g., Buch and Lipponer (2007)), this paper is the first to show empirical evidence for the relevance of this tradeoff.…”

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confidence: 80%

Banking across Borders with Heterogeneous Banks

Niepmann

2013

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractIndividual banks differ substantially in their foreign operations. This paper introduces heterogeneous banks into a general equilibrium framework of banking across borders to explain the documented variation. While the model matches existing micro and macro evidence, novel and unexplored predictions of the theory are also strongly supported by the data: The efficiency of the least efficient bank active in a host country increases the greater the impediments to banking across borders and the efficiency of the banking sector in the host country. There is also evidence of a tradeoff between proximity and fixed costs in banking. Banks hold more assets and liabilities in foreign affiliates relative to cross-border positions if the target country is further away and the cost of foreign direct investment is low. These results suggest that fixed costs play a crucial role in the foreign activities of banks.

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confidence: 80%

Banking across Borders with Heterogeneous Banks

Niepmann

2013

SSRN Journal

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“…First, the External Position Report is a census without a reporting threshold, which mitigates the sample selection concerns in previous international banking studies (e.g. Buch and Lipponer, 2007). German banks are heterogeneous in terms of their size, ranging from mean customer lending of €36 million in the bottom quartile to a mean of €4.4 billion in the largest quartile of banks.…”

Section: Motivationmentioning

confidence: 99%

Size, productivity, and international banking

Buch

Koch

Koetter

2011

Journal of International Economics

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Heterogeneity in size and productivity is central to models that explain which manufacturing firms export. This study presents descriptive evidence on similar heterogeneity among international banks as financial services providers. A novel and detailed bank-level data set reveals the volume and mode of international activities for all German banks. Only a few, large banks have a commercial presence abroad, consistent with the size pecking order documented for manufacturing firms. However, the relationship between internationalization and productivity also yields two inconsistencies with recent trade models. First, virtually all banks hold at least some foreign assets, irrespective of size or productivity. Second, some fairly unproductive banks maintain commercial presences abroad. Heterogeneity in size and productivity is central to models that explain which manufacturing firms export. This study presents descriptive evidence on similar heterogeneity among international banks as financial services providers. A novel and detailed bank-level data set reveals the volume and mode of international activities for all German banks. Only a few, large banks have a commercial presence abroad, consistent with the size pecking order documented for manufacturing firms. However, the relationship between internationalization and productivity also yields two inconsistencies with recent trade models. First, virtually all banks hold at least some foreign assets, irrespective of size or productivity. Second, some fairly unproductive banks maintain commercial presences abroad.© 2011 Elsevier B.V. All rights reserved. MotivationTo present descriptive evidence on the relationship between size, productivity, and the internationalization patterns of banks, we use a novel micro data set: the External Position Report (Auslandsstatus) provided by the German central bank, the Deutsche Bundesbank. Using data that cover all 2226 German banks' international exposures in 63 countries during the years 2002-2006, we explore a potentially important new data source for research in international trade in financial services. We ask if observed internationalization patterns of banks are consistent with the evidence previously presented for manufacturing firms.In manufacturing, larger and more productive firms are more likely to export and engage in foreign direct investment (FDI) than are smaller and less productive firms (Eaton et al., 2004;Helpman et al., 2004;Bernard et al., 2007;Lileeva and Trefler, 2010), due to the interaction between firm-level productivity and the costs of market entry (Melitz, 2003;Helpman et al., 2008): domestic fixed costs are lower than the fixed costs of exporting, which are lower than the fixed costs of FDI.1 Firms self-select into different modes of entry, because the higher fixed costs of more complex foreign activity modes require higher productivity, which results in a "pecking order of productivity". We distinguish the cross-border provision of financial services and commercial presences (branches or subs...

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“…By 2015 this number had increased to 89 countries. 5 According to Buch and Lipponer (2007) this may be directly related to the heterogeneity in productivity of banks themselves, leading to selection into different forms of internationalization much like the process by which MNEs internationalize.…”

Section: Deregulation Banking Globalization and Fdimentioning

confidence: 99%

Financial Globalization and Foreign Direct Investment

Poelhekke

2016

SSRN Journal

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FDI versus exports: Evidence from German banks

Cited by 94 publications

References 22 publications

Banking across Borders with Heterogeneous Banks

Banking across Borders with Heterogeneous Banks

Size, productivity, and international banking

Financial Globalization and Foreign Direct Investment

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