Do Banks Benefit from Internationalization? Revisiting the Market Power--Risk Nexus

Claudia Buch, Cathérine T. Koch and Michael Koetter
Authors registered in the RePEc Author Service: Catherine Tahmee Casanova

Review of Finance, 2013, vol. 17, issue 4, 1401-1435

Abstract: We analyze the impact of bank internationalization on domestic market power (Lerner index) and risk for German banks. Risk is measured by the official declaration of regulatory authorities that a bank is distressed. We distinguish the volume of foreign assets, the number of foreign countries, and different modes of foreign entry. Our analysis has three main results. First, higher market power is associated with lower risk. Second, holding assets in many countries reduce market power at home, but banks with a higher share of foreign assets exhibit higher market power. Third, bank internationalization is only weakly related to bank risk. Copyright 2013, Oxford University Press.

Date: 2013
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Working Paper: Do banks benefit from internationalization? Revisiting the market power-risk nexus (2010)
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