How Does Regulation Affect the Organizational Form of Banks' Presence in Developing and Developed Countries?

Annick Pamen Nyola (), Alain Sauviat () and Amine Tarazi
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Annick Pamen Nyola: LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges
Alain Sauviat: LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges

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Abstract: Using a unique hand-collected dataset of 1,251 European Union banks and their 20,850 foreign affiliates hosted in 154 countries, this paper investigates how both host country and home country regulation affects their decision on how to go abroad to both developed and developing countries. Controlling for various factors, we find that host country banking regulation is an important factor in explaining organizational form (subsidiaries versus branches), but that such a factor is strongly influenced by the level of development of the host country. While banks are very careful in limiting their expansion to the relatively safest world countries, they are more likely to open branches rather than subsidiaries in countries with stringent activity restrictions and capital requirements; especially when they are relatively less efficient. Additionally, retail-oriented banks tend to prefer to operate subsidiaries in the most developed countries and competitive markets.

Keywords: Bank regulation; Internationalization; Foreign branch; Foreign subsidiary; Cross-border entries; Economic development (search for similar items in EconPapers)
Date: 2017-11-16
New Economics Papers: this item is included in nep-ban and nep-cse
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-01369658

DOI: 10.2139/ssrn.2841608

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