چه چیزی باعث توسعه خارجی 100 بانک برتر چند ملیتی شده است؟ نقش سیستم گزارش دهی اعتباری
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|17511||2011||18 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Banking & Finance, Volume 35, Issue 3, March 2011, Pages 588–605
This study explores how information costs, proxied by characteristics of credit reporting systems, affect the foreign expansion of the top 100 multinational banks. We find that banks prefer to expand operations in countries where private credit bureaus exist or where the credit reporting system is of better quality. This preference is particularly strong for banks’ branch decisions. Furthermore, banks prefer subsidiary entry only in countries where private credit bureaus exist with better credit information quality. Overall, our results indicate that banks are attracted to countries where the credit reporting system helps reduce banks’ information costs.
Motivated by the trend of globalization and internationalization, banks generally expand abroad to support the international business of existing clients and to develop new businesses in host countries. Researchers have described what drives multinational banks’ foreign expansion. Clarke et al. (2003) show that banks tend to follow their customers abroad and that larger banks are more likely to expand abroad, but restrictions on foreign direct investment may reduce bank incentives to enter other countries. Furthermore, banks prefer expanding to countries with a larger economic size (Brealey and Kaplanis, 1996), and they are less likely to operate in countries far away from their home country (Focarelli and Pozzolo, 2005). Another strand of literature shows that regulatory barriers and information costs are the main features driving bank activities. For example, Buch (2003) presents that deregulation encourages international banking activities, and to reduce information costs banks generally expand operations to countries that are closer and to countries that speak the same language. Moreover, when credit bureaus exist to facilitate exchanges of information among banks, the information costs of banks drop (Pagano and Jappelli, 1993). The reduced information costs tend to increase bank lending, reduce bank risk level, increase credit availability to firms, and cut the credit costs of firms (Jappelli and Pagano, 2002, Brown et al., 2009 and Houston et al., 2010). We extend the literature to investigate how information costs affect the location choices of banks as they expand their foreign operations. In countries with a credit reporting system, it is easier for banks to collect information and evaluate the creditworthiness of potential borrowers. Thus, the cost of gathering information on borrowers may decrease. This is especially crucial to foreign banks that are new to the market and are not familiar with local borrowers. With access to the credit history of potential borrowers from the credit reporting system, foreign banks can identify potential customers with good payment histories and avoid making loans to borrowers with late payments or defaults. Therefore, we expect lenders’ information costs to be lower in countries where a credit reporting system exists or in countries where credit reports provide better borrower information in terms of timeliness, accuracy, and completeness. To directly test the importance of information costs on banks’ foreign expansion, we explore whether bank foreign operations are more likely to be located in countries where a credit reporting system exists and where better borrower information is available from the credit reports. Using data on the foreign branches and subsidiaries of the top 100 multinational banks from 2001 to 2007, we document that the decision to enter or expand operations in a given country is affected by characteristics of the credit reporting system in that country. First, we show that banks are attracted to countries where credit reporting agencies exist. Second, banks are more attracted to countries with private credit bureaus than countries with public credit registries. Third, our results indicate that banks prefer expanding to countries where the credit reporting system provides better quality of credit information in terms of timeliness, accuracy, and completeness. To our best knowledge, this is the first paper testing directly whether information costs affect the foreign expansion of banks, while the existing literature presents evidence that credit bureaus tend to reduce information costs for banks with positive effects for the real economy in terms of an increase in banking lending, lower rates for firms, and a decrease of bank riskiness (Pagano and Jappelli, 1993, Jappelli and Pagano, 2002, Brown et al., 2009 and Houston et al., 2010). Our results further suggest that by reducing bank information costs, the credit reporting system in a host country plays a role in attracting foreign bank operations. The remainder of the paper proceeds as follows. Section 2 presents the literature review and hypothesis development. Section 3 explains how we construct our datasets. Section 4 describes the model specifications. Section 5 reports our empirical results and Section 6 offers conclusions and recommendations.
نتیجه گیری انگلیسی
This paper analyzes the determinants of foreign expansion of the top 100 multinational banks. Existing studies mainly focus on exploring the effects of regulatory regimes on bank foreign activi- ties ( Buch, 2003; Focarelli and Pozzolo, 2005; Cerutti et al., 2007 ). To increase our understanding of how information costs affect bank activities, this study aims to investigate whether information costs matter for multinational banks’ location decisions. We are able to use those indices representing the characteristics of credit reporting systems in 103 host countries as proxies for the information costs of multinational banks in these countries. We ask what attracts banks to start business in a particular host country and what drives banks to further increase their foreign opera- tions in a host country. The main argument is that banks are attracted to countries with better credit reporting systems, be- cause the information costs are lower when a credit reporting agency exists and the costs fall further when better quality of infor- mation is shared within the credit system. In support of our main argument, the results show that banks prefer expanding to coun- tries where their information costs are lower. The main results are summarized as follows. First, the existence ofacreditreportingagencyincreasestheprobabilityofbanksenter- ing a particular host country and also improves bank incentives to further expand activities by establishing branches or subsidiaries in a host country. Second, the typeof credit reporting agency affectsbankdecisions to entera marketor tofurtherincrease operationsin acountry.Theexistenceofprivatecreditbureausincreasestheprob- abilityofbanksenteringahostcountry,whiletheexistenceofpublic credit registries does not work to increase bank willingness to enter a country. Third, the quality of information contained in the credit reports provided by a credit reporting system also matters. Banks are more likely to enter or expand operations in a country where thecreditagenciessupplybetterinformationintermsoftimeliness, accuracy, and comprehensiveness. The characteristics of a credit reporting system affect differently the decision between expansion through a branch or through a subsidiary. Both high credit information quality and private credit bureaus have stronger effects on expansion with a branch than with a subsidiary. Furthermore, subsidiary expansion is preferred to branch expansion only when a host country has a private credit bureau with high credit information quality. We also find some interesting results regarding the effects of supervisory regulations. First, activities’ restrictions negatively influence bank incentives to establish subsidiaries, but do not af- fect branch decisions. In many countries, restriction levels reflect the extent to which banks are allowed to conduct activities in subsidiaries. Thus, restrictions only affect bank decisions to estab- lish subsidiaries, i.e., fewer activity restrictions increase bank incentives to establish subsidiaries. Second, in support of Focarelli and Pozzolo’s (2008) claim, we show that the G10 countries have more implicit barriers to foreign entry and thus are more difficult for foreign banks to access than developing countries. We contribute to the literature on bank foreign expansion by showing how credit reporting systems affect bank decisions on where to expand their foreign operations, while previous studies investigate host country attractiveness by examining the effects of economic integration between countries, the host country’s eco- nomic condition, and supervisory regulation. We show that a credit reporting agency helps reduce bank information costs by sharing resources among members, and bank information costs are further reduced in countries where credit agencies provide better credit information in terms of timeliness, accuracy, and completeness. Our evidence indicates that banks are attracted to enter or further expand operations in countries where information costs are lower.