Margins of international banking: is there a productivity pecking order in banking, too?

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

No 2009,12, Discussion Paper Series 2: Banking and Financial Studies from Deutsche Bundesbank

Abstract: Modern trade theory emphasizes firm-level productivity differentials to explain the cross-border activities of non-financial firms. This study tests whether a productivity pecking order also determines international banking activities. Using a novel dataset that contains all German banks' international activities, we estimate the ordered probability of a presence abroad (extensive margin) and the volume of international assets (intensive margin). Methodologically, we enrich the conventional Heckman selection model to account for the self-selection of banks into different modes of foreign activities using an ordered probit. Four main findings emerge. First, similar to results for non-financial firms, a productivity pecking order drives bank internationalization. Second, only a few non-financial firms engage in international trade, but many banks hold nternational assets, and only a few large banks engage in foreign direct investment. Third, in addition to productivity, risk factors matter for international banking. Fourth, gravity-type variables have an important impact on international banking activities.

Keywords: International banking; extensive and intensive margin; productivity pecking order; ordered probit; selection models (search for similar items in EconPapers)
JEL-codes: F3 G21 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-ban, nep-eff and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/28621/1/611383721.pdf (application/pdf)

Related works:
Working Paper: Margins of International Banking: Is there a Productivity Pecking Order in Banking, too? (2009)
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:zbw:bubdp2:200912

Access Statistics for this paper

More papers in Discussion Paper Series 2: Banking and Financial Studies from Deutsche Bundesbank Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().