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

Arbeitspapier

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.

Object Details

• ISBN: 978-3-86558-569-1
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Paper Series 2 ; No. 2009,12

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• Subject: International banking ; extensive and intensive margin ; productivity pecking order ; ordered probit ; selection models ; Internationale Bank ; Bankgeschäft ; Internationale Markteintrittsstrategie ; Produktivität ; Probit-Modell ; Schätzung ; Deutschland

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Buch, Claudia M. ; Koch, Cathérine Tahmee ; Koetter, Michael
• Event: Veröffentlichung
• (who): Deutsche Bundesbank
• (where): Frankfurt a. M.
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/28621
• Last update: 10.03.2025, 11:45 AM CET