Uneven regulatory playing field and bank transparency abroad

Tai-Yuan Chen (), Yi-Chun Chen () and Mingyi Hung ()
Additional contact information
Tai-Yuan Chen: The Hong Kong University of Science and Technology Business School
Yi-Chun Chen: City University of Hong Kong
Mingyi Hung: The Hong Kong University of Science and Technology Business School

Journal of International Business Studies, 2022, vol. 53, issue 3, No 1, 379-404

Abstract: Abstract Motivated by international business research on institutional arbitrage and headquarters–subsidiary relationships, we examine the effect of regulatory distance on multinational banks’ (MNBs) reporting transparency abroad. Using an international sample of foreign subsidiary banks in 46 host countries from 47 home countries, we find that bank transparency declines when the home countries have tighter activity restrictions than the host countries. We bolster the causal inference using difference-in-differences designs that take advantage of banking reforms and cross-border bank acquisitions. We also find that the result is more pronounced when parent banks have lower capital ratios or when host countries have weaker supervisory power, suggesting that parent banks use opaque reporting to conceal risk-taking abroad. Further analysis finds that less transparent subsidiaries are more likely to fail during financial crises. Overall, our findings suggest that regulatory distance creates negative externalities for bank transparency and stability abroad.

Keywords: transparency within and among MNEs and national states; agency theory; multinational corporations (MNCs) and enterprises (MNEs); headquarters–subsidiary roles and relations (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1057/s41267-021-00491-6 Abstract (text/html)
Access to full text is restricted to subscribers.

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:pal:jintbs:v:53:y:2022:i:3:d:10.1057_s41267-021-00491-6

Ordering information: This journal article can be ordered from
http://www.springer. ... nt/journal/41267/PS2

DOI: 10.1057/s41267-021-00491-6

Access Statistics for this article

Journal of International Business Studies is currently edited by John Cantwell

More articles in Journal of International Business Studies from Palgrave Macmillan, Academy of International Business
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().