Are international banks different? Evidence on bank performance and strategy

Ata Bertay, Asli Demirguc-Kunt, Harry Huizinga

Research output: Contribution to journalArticleScientificpeer-review

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Abstract

This paper provides evidence on how bank performance and strategies vary with the degree of bank internationalization using data for 113 countries during 2000–15. Bank internationalization is associated with lower valuations and lower returns on equity. After the global financial crisis, international banks were revalued particularly if they had stable funding in the form of deposits and if they had more generous deposit insurance coverage. For international banks headquartered in developing countries, bank internationalization is related negatively with the cyclicality of their domestic credit growth with respect to home country GDP growth, smoothing local downturns. In contrast, if the international bank is from a high-income country investing in a developing country, its subsidiary bank lending is relatively procyclical, which can be destabilizing.
Original languageEnglish
JournalJournal of Financial Services Research
DOIs
Publication statusE-pub ahead of print - Nov 2022

Keywords

  • bank internationalization
  • financial crisis
  • deposit funding
  • procyclicality

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