The (Un)Profitability of Bank Internationalization

30 Pages Posted: 8 Dec 2008 Last revised: 30 Sep 2009

See all articles by Arjen Mulder

Arjen Mulder

Erasmus University Rotterdam (EUR) - Department of Financial Management

Alfred Slager

Tilburg University - TIAS School for Business and Society

Date Written: August 27, 2008

Abstract

We investigate the impact of internationalization of banks on their performance. Using a novel data set comprising of the world's 46 largest banks spanning 1980-2004, we find that internationalization decreases performance measures as return-on assets or return-on-sales. That negative effect is magnified when controlling for risk or for response time lags. At best, internationalization has a very weak positive effect on performance on a forward-looking performance measure as Tobin's Q. We explain this discrepancy in performance by means of nonparametric tests, and find weak evidence for a nonlinear pattern in which internationalization may deliver value for banks beyond an internationalization threshold of approximately 50 percent.

Keywords: Banking and finance, internationalization, linear probability models, non-parametric analysis

JEL Classification: G21, F23

Suggested Citation

Mulder, Arjen and Slager, Alfred, The (Un)Profitability of Bank Internationalization (August 27, 2008). Available at SSRN: https://ssrn.com/abstract=1259706 or http://dx.doi.org/10.2139/ssrn.1259706

Arjen Mulder (Contact Author)

Erasmus University Rotterdam (EUR) - Department of Financial Management ( email )

P.O. Box 1738
Office T08-35
3000 DR Rotterdam, 3000DR
Netherlands
+31.10.4081929 (Phone)

Alfred Slager

Tilburg University - TIAS School for Business and Society ( email )

Warandelaan 2
TIAS Building
Tilburg, Noord Brabant 5037 AB
Netherlands

Register to save articles to
your library

Register

Paper statistics

Downloads
192
Abstract Views
918
rank
155,679
PlumX Metrics