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Discussion Paper Series 2: Banking and Financial Studies, Deutsche Bundesbank >
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http://hdl.handle.net/10419/28621
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| Title: | | Margins of international banking: is there a productivity pecking order in banking, too?  |
| Authors: | | Buch, Claudia M. Koch, Cathérine Tahmee Koetter, Michael |
| Issue Date: | | 2009 |
| Series/Report no.: | | Discussion Paper Series 2: Banking and financial studies 2009,12 |
| 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. |
| Subjects: | | International banking extensive and intensive margin productivity pecking order ordered probit selection models |
| JEL: | | F3 G21 |
| ISBN: | | 978-3-86558-569-1 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Discussion Paper Series 2: Banking and Financial Studies, Deutsche Bundesbank
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