How does regulation affect the organizational form of foreign banks' presence in developing versus developed countries?

Annick Pamen Nyola, Alain Sauviat and Amine Tarazi
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Alain Sauviat: UNILIM - Université de Limoges, LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges

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Abstract: Using a unique hand‐collected dataset of 1,251 European Union banks and 20,850 foreign affiliates hosted in 154 countries, this paper investigates how both host country and home country regulations affect the decision on where and how to go abroad in developing countries as opposed to developed countries. We find that banks prefer high‐income countries with numerous activity restrictions and weaker supervision but less developed countries with less restrictions and stronger supervision. In all cases, they avoid locations with stronger capital regulation than at home. Regarding the choice of foreign organizational form (branches versus subsidiaries), banks rather operate subsidiaries in both high and middle‐income countries with stringent entry requirements but prefer branches in developing countries with stringent capital requirements and greater supervisory power. Our findings contribute to the literature examining bank internationalization and have several policy implications for regulatory reforms in developing and developed countries.

Date: 2022-04-01
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Published in International Journal of Finance and Economics, 2022, 27 (2), pp.2367-2419. ⟨10.1002/ijfe.2278⟩

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Related works:
Journal Article: How does regulation affect the organizational form of foreign banks' presence in developing versus developed countries? (2022)
Working Paper: How does regulation affect the organizational form of foreign banks’ presence in developping versus developped countries ? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04681688

DOI: 10.1002/ijfe.2278

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