European banks straddling borders: Risky or rewarding?

Patty Duijm () and Dirk Schoenmaker ()

Finance Research Letters, 2021, vol. 38, issue C

Abstract: Banks that straddle borders may not only do so via foreign subsidiaries; they can also conduct their cross-border banking activities via a branch or directly to customers. Existing studies on the impact of cross-border banking often focus on the cross-border activities via foreign subsidiaries. We use a unique hand-collected dataset with cross-border activities for the 61 largest European banks to study the impact cross-border banking has on the risk-return profile of an individual bank. Our results show that cross-border banking decreases banks’ risk, by lowering the insolvency risk and generating a more stable income profile.

Keywords: International banking; Bank regulation; Financial stability; Risk; Geographical diversification (search for similar items in EconPapers)
JEL-codes: E44 G21 G28 (search for similar items in EconPapers)
Date: 2021
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Working Paper: European Banks Straddling Borders: Risky or Rewarding? (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319310797

DOI: 10.1016/j.frl.2020.101525

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