Clustering or Competition? The Foreign Investment Behavior of German Banks

Claudia Buch and Alexander Lipponer

International Journal of Central Banking, 2006, vol. 2, issue 2

Abstract: Banks often concentrate their foreign direct investment (FDI) in certain countries. This clustering of activities could reflect either the attractiveness of a particular country or agglomeration effects. To find out which of the two phenomena dominates, we need to control for country-specific factors. We use new bank-level data on German banks’ FDI for the 1996 - 2003 period.We test whether the presence of other banks has a positive impact on the entry of new banks. Once we control for the attractiveness of a country through fixed effects, the negative impact of competition dominates. Hence, pure clustering effects are rather unimportant.

JEL-codes: F0 F21 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (8)

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