Globalization of Financial Institutions: Evidence from Cross-Border Banking Performance
Allen N. Berger
University of South Carolina - Moore School of Business; Wharton Financial Institutions Center; Tilburg University - CentER
University of Kansas School of Business
Gregory F. Udell
Indiana University Bloomington - Department of Finance
Federal Reserve Bank of Chicago
Brookings-Wharton Papers, Vol. 3, 2000
We address the causes, consequences, and implications of the cross-border consolidation of financial institutions by reviewing several hundred studies, providing comparative international data, and estimating cross-border banking efficiency in France, Germany, Spain, the U.K., and the U.S. during the 1990s. We find that, on average, domestic banks have higher profit efficiency than foreign banks. However, banks from at least one country (the U.S.) appear to operate with relatively high efficiency both at home and abroad. If these results continue to hold, they do not preclude successful international expansion by some financial firms, but they do suggest limits to global consolidation.
JEL Classification: G21, G28, G34, E58, L89Accepted Paper Series
Date posted: March 24, 2000
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