International diversification gains and home bias in banking

Alicia García-Herrero and Francisco Vazquez
Authors registered in the RePEc Author Service: Alicia Garcia Herrero

Journal of Banking & Finance, 2013, vol. 37, issue 7, 2560-2571

Abstract: This paper studies international diversification in banking, exploiting a bank-level dataset that covers the operations of 38 global banks and their subsidiaries overseas during 1995–2004. The paper finds that banks with a larger share of assets allocated to subsidiaries in emerging market countries were able to attain higher risk-adjusted returns. These gains were somewhat reduced by the concentration of bank subsidiaries in specific geographical regions, which is typical of the observed international expansion strategies. The paper also finds a substantial home bias in the international allocation of bank assets relative to the results of a mean–variance portfolio optimization model.

Keywords: International banking; Home bias; Portfolio diversification; Basel II; Basel III (search for similar items in EconPapers)
JEL-codes: E44 F40 G11 G21 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Working Paper: International Diversification Gains and Home Bias in Banking (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:7:p:2560-2571

DOI: 10.1016/j.jbankfin.2013.02.024

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