Why Do Banks Go Abroad? Evidence Using a Three-Way Error Component Model

Tamrat W. Gashaw and Michael Ryan
Additional contact information
Tamrat W. Gashaw: Wartburg College

Journal of Economic Insight, 2012, vol. 38, issue 2, 79-107

Abstract: This paper examines whether a host country's bank-capital-to-asset ratio and internet capability affect inward banking FDI. To do so we develop a two-asset portfolio selection model to analyze the risk-return factors in banking FDI. We then employ a three-way error component estimation model to account for time fixed effects as well as unobserved source- and host-country heterogeneity. The investment activities of 1156 banks from 20 source countries into 108 host countries over the period of 2000 - 2008 indicate that low bank-capital-to-asset ratio, better telecommunications infrastructure, strong bilateral trade, and the host's economic and financial sector development increase inward banking FDI. Finally, increased source-host geographic distance and the source country's government effectiveness affect banks' international investment activity.

JEL-codes: C13 F21 F23 G11 (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mve:journl:v:38:y:2012:i:2:p:79-107

Access Statistics for this article

Journal of Economic Insight is currently edited by Christopher Douglas and Joshua Lewer

More articles in Journal of Economic Insight from Missouri Valley Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Cullen Goenner ().