FDI versus cross-border financial services: The globalisation of German banks

Claudia Buch and Alexander Lipponer

No 2004,05, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank

Abstract: The choice between foreign direct investment (FDI) and exports has been a recurrent theme in the literature on international trade, yet few studies have analysed this choice at the level of the individual firm. This paper uses a new dataset to study the FDI-versus-exports decision for banks. We use data on the foreign direct investment stocks and the cross-border provision of financial services of German banks for the period 1997-2000 to describe the regional pattern of banks' international activities. We find that country- and bank-specific variables capturing size have a major impact on banks' foreign activities. The results are consistent with the hypothesis that the realisation of economies of scale and the provision of trade-related finance shape globalisation patterns. Greater cultural and geographical distance, by contrast, potentially limit the international expansion of banks. Our results also suggest that FDI and cross-border services are complements rather than substitutes.

Keywords: international banking; gravity equations; foreign direct investment; cross-border financial services (search for similar items in EconPapers)
JEL-codes: F0 F21 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (34)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp1:1818

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