Gerarda WesterhuisDepartment of Finance, Rotterdam School of Management, Erasmus University;Department of History and Art History, Utrecht University, the NetherlandsView further author information
This article analyses the determinants of bank internationalisation, of the world's largest banks from the period 1980–2007. The purpose of the article is twofold. First, we show how a mixed-methods research design, in which we combine a variables-based research with three case studies, can contribute to the field of business history. The variables-based research helps to detect general trends, but the statistical analysis alone only provides a limited understanding of the factors that drive the trends. By analysing selected case studies, we provide a context within which the statistical results are better understood. The second purpose is to understand trends in the internationalisation strategies of banks from different regions, and during different time periods. Contrasting with prior research, we find that Japanese and US banks have exhibited different internationalisation pattern as opposed to the European banks. Also, the determinants of bank internationalisation differ in importance over time. Using case studies, we show the importance of the changing regulatory environment.
13. It is not our intention to recapitulate the extant literature on international business theory. We refer to CitationBuckley, “Business History,” for an excellent overview of theories on multinational enterprises.
39. See CitationWesterhuis, Conquering the American Market, for Dutch banks entering the US; see CitationLu, “The US Government Dual Banking,” for HSBC acquiring Marine Midland Banks Inc.
43.CitationKing and Levine, “Finance and Growth.” They also proposed two more indicators of financial development that measure to whom the financial sector is allocating credit.
50. See for example Westerhuis, Conquering American Market; CitationKobrak, Banking on Global Markets; Cattani and Tschoegl, “An Evolutionary View”; Engwall et al., “Foreign Bank Penetration”; Boldt-Christmas et al., “The International Expansion”; CitationJones, Banks as Multinationals.
60.CitationHejazi and Santor, “Foreign Asset Risk Exposure”; CitationFocarelli and Pozzolo, “Where do Banks Expand Abroad?” Alternative measures of bank internationalization predominantly focus on the number of foreign branches and offices (see for example CitationTschoegl, “Size, Growth, and Transnationality”; CitationBuch, Koch, and Koetter, “Should I Stay”). Though that data can be relatively easily obtained, and is free of differences accounting practices, it has the major drawback that counting offices irrespective of their size and contribution to the overall sales is a very crude measure (see CitationBrealey and Kaplanis, “The Determination Foreign Banking,” for a discussion).
61. We use bank in a broad sense to cover a wide range of financial institutions, including commercial, investment and universal banks. The reason for restricting ourselves to five banks per country is to avoid dominance by, e.g. the US and UK.
62. For some firms at the start of the sample, we could not obtain foreign employment figures, or foreign sales. As a consequence, these firms exhibit unstable DOIs in the earliest one or two years of the sample period.
65. The DOI variable has a strong autocorrelation of order 1. This autocorrelation requires a different model specification. At higher lags this autocorrelation is absent.
66.CitationArellano and Bond, “Some Tests of Specification”. This method is based upon the generalised method of moments (GMM) which is an econometric estimation method.
67. The presented OLS estimates are biased and inconsistent.
69. Deposit savings are a cheap source of financing for banks.
70. In Table , it appeared that for Model 1 per capita GDP had a negative and statistically significant correlation with bank internationalization (in the GMM estimates). Yet, in Model 3 (which was used as our reference for Tables 4 and 5) the relationship was statistically insignificant for the GMM estimates.
115. See for example CitationBátiz-Lazo and Wood, “Strategy, Competition and Diversification” for an analysis of the influence of management styles on diversification strategies within bank markets.
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This work was supported by The Netherlands Organisation for Scientific Research (NWO) [grant number 275-53-010 (Veni granted to Gerarda Westerhuis)].
Notes on contributors
Arjen Mulder
Gerarda Westerhuis works as a researcher at the Department of History and Art History (Utrecht University) and as a lecturer at the Department of Finance, Rotterdam School of Management (Erasmus University). Recently, she started her new research project entitled “Unraveling the origins of a banking crisis: changing perceptions of risk and managerial beliefs in Dutch banking, 1957–2007”. Her main research interests are banking, financing, corporate governance, networks and financial elites.
Gerarda Westerhuis
Arjen Mulder is assistant professor of corporate finance at the Department of Finance, Rotterdam School of Management, Erasmus University. His main research interests are corporate finance, international finance, international business, and banking.