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|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|18242||2003||33 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Banking & Finance, Volume 27, Issue 3, March 2003, Pages 383–415
We model two dimensions of bank globalization – bank nationality (a bank from the firm’s host nation, its home nation, or a third nation) and bank reach (a global, regional, or local bank) using a two-stage nested multinomial logit model. Our data set includes over 2000 foreign affiliates of multinational corporations operating in 20 European nations and over 250 banks that serve them. We find that these firms frequently use host nation banks for cash management services, and that bank reach may be strongly influenced by this choice of bank nationality. Our results suggest limits to the degree of future bank globalization.
Recent years have seen a drastic reduction in global barriers to competition in the financial services industry. Deregulation around the world has permitted consolidation across more distant and more different types of financial institutions. Improvements in information processing, telecommunications, and financial technologies have facilitated greater geographic reach by allowing institutions to manage larger information flows from more locations and to evaluate and manage risks at lower cost without geographic proximity to the customer. Moreover, growth in cross-border activities of non-financial companies has spurred greater demands for institutions that can provide financial services across borders. Despite these forces, the financial services industry in general, and the commercial banking industry in particular, currently remain far from globalized. While there has been considerable bank consolidation within individual industrialized nations in recent years, cross-border bank mergers and acquisitions (M&As) among these nations have generally been much less frequent (Group of Ten, 2001). In most other nations as well, market shares of foreign-owned banks are generally below 10% (Levine, 1996). We argue here that the banking industry may never become fully globalized, even after adjusting to the full effects of deregulation, technological progress, and increased cross-border non-financial activity. Some banking services – such as relationship lending to informationally opaque small businesses – may always be provided primarily by small, local institutions operating in the nation in which the services are demanded. Other services, such as syndicated loans to large borrowers, are more likely to be provided by large, global institutions for which the home nations of these institutions are of much less consequence to the demanders of the services. In our view, the better question is not when or if the banking industry will be globalized, but rather the extent to which it will be globalized. To address this question, we examine how more than 2000 foreign affiliates of large multinational corporations choose banks for cash management services in each of 20 European nations. The term cash management covers a variety of core banking services, with an emphasis on services that require frequent turnover, including liquidity management, short-term lending, foreign exchange transactions, and assistance with hedging. In effect, cash management refers to virtually all short-term banking needs, and generally requires a physical presence in the nation in which the services are provided. The provision of cash management services to foreign affiliates of large multinational corporations represents a crucial “middle ground” of financial services that could be provided by (1) small local banks that operate only in the host nation, (2) global banks headquartered in a few financial centers, but with offices in many nations around the world, or (3) institutions between these two extremes. Moreover, because cash management services to foreign affiliates of large multinational corporations represent a significant portion of the potential market for global banks, they may be influential in determining the extent to which the banking industry will become globalized. To our knowledge, there is no prior research on the choice of bank for cash management services by these firms. Europe provides an excellent laboratory for studying the globalization of the banking industry. It has many developed nations that are geographically proximate, virtually no formal regulatory restrictions on cross-border bank entry within the EU, and substantial variation across nations in banking sector size and financial development. Our sample includes information from nations with large banking sectors and relatively well-developed financial systems (e.g., the UK and Germany), nations with smaller banking sectors, but well-developed financial systems (e.g., Austria and Norway), countries with small banking sectors and less-developed financial systems (e.g., Portugal and Greece) and former socialist nations with developing financial systems (e.g., the Czech Republic and Hungary). This variation allows us to test for the effects of banking sector size, financial development, legal structure, and other factors that might influence the extent to which the banking industry becomes globalized. We identify two distinct dimensions of globalization – bank nationality and bank reach. Bank nationality refers to the location of a bank’s headquarters relative to the host nation where the affiliate operates and the affiliate’s corporate home. A host nation bank is headquartered in the nation in which the affiliate operates, a home nation bank is headquartered in the same nation as the multinational corporation’s headquarters, and a third nation bank is headquartered in neither the host nor the home nation. A foreign affiliate of a multinational corporation may prefer a host nation bank for the “concierge” services that it can provide. That is, a host nation bank may best know the local market, culture, language, and regulatory conditions in the host nation, and have superior information about local non-financial suppliers and customers. An affiliate may instead prefer a home nation bank that can offer the “home cookin’” advantages of knowing the market, culture, language, and regulatory conditions of the affiliate’s home nation. A home nation bank may also be the bank that serves the headquarters of the corporation, which may yield an informational advantage in providing services to the firm and relationship benefits to the corporation as a whole. Alternatively, the firm may choose a third nation bank based on other factors if neither the concierge benefits of a host nation bank nor the home cookin’ benefits of a home nation bank is of great consequence. Bank reach refers to the geographic scope and size of the chosen bank. A global bank operates in many nations and is among the world’s largest institutions, a local bank operates in a single nation, and a regional bank lies between these extremes. Some firms operating in a foreign country may prefer a global bank that offers the broadest range of financial services, expertise within many foreign markets, and the ability to facilitate large deals. Global banks may also provide superior stability because of their risk diversification and/or implicit government protections against closure. Other firms may prefer a local bank that may be more focused on establishing a close relationship with the firm or may be better able to offer specific information about doing business in the local market. Still other firms may find that the tradeoff between services offered by global and local banks leads them to choose the intermediate reach of a regional bank. We empirically investigate bank nationality and reach using a two-stage nested multinomial logit (NMNL) model. In the model, firms first choose bank nationality – a host nation bank if the concierge benefits dominate, a home nation bank if the home cookin’ benefits dominate, and possibly a third nation bank if neither set of benefits is very important. We assume that this choice depends on host nation characteristics, geographic, cultural, and financial differences between the home and host nations, and attributes of the corporation itself. These variables are designed to reflect both the demand of the firms for cash management services from banks of different nationalities and the willingness and ability of these banks to supply the services. Conditional on bank nationality, firms then select bank reach based on preferences for the range of services, financial stability, relationship services, and local knowledge offered by global, regional, and local banks. We model this decision directly as a function of corporate attributes, but note that within the structural model, the choice also depends indirectly on host nation characteristics and home nation–host nation differences through the determination of bank nationality. We model bank nationality and reach in this way – with the choice of bank nationality potentially affecting the degree of bank reach – for several reasons. First, we argue that choice of bank nationality – i.e., the tradeoff between concierge and home cookin’ benefits – is of primary importance in choosing a bank for cash management services. Second, the dependence of bank reach on the choice of bank nationality logically follows from the observation that banks can only expand across international borders to the extent that customers are willing to purchase services from foreign-owned banks. For instance, in the extreme case in which all customers preferred host nation banks for all services, banks might not cross any borders, and all services might be provided by local banks. Third, as described below, the raw data on bank nationality and reach are consistent with this model structure. Our approach to examining the extent of bank globalization makes several contributions. First, to our knowledge, this is the first study to examine bank nationality and bank reach together and view these as joint determinants of bank globalization. Bank reach is usually viewed in isolation as measuring bank globalization, but we argue that bank nationality is also important. Second, we provide a set of stylized facts on the choice of bank for cash management services made by the foreign affiliates of large, multinational corporations. These services provided to these firms constitute a significant portion of the potential market for global banking services and lie in the crucial middle ground of financial services that could be provided by banks of virtually any nationality and reach. Third, we investigate some of the potential determinants of bank nationality and reach, including host nation characteristics, home–host nation differences, and attributes of the corporations themselves. Our investigation yields a number of interesting findings, three of which we briefly preview here. First, we find that foreign affiliates of multinational companies choose host nation banks for cash management services more often than home nation or third nation banks. This result is consistent with concierge benefits dominating home cookin’ benefits, and may be surprising given that firms might be expected to prefer their home nation banks. Second, we find that bank reach is strongly associated with bank nationality. For example, if a host nation bank is the choice of nationality, then the firm is much less likely to choose a global bank. Third, we find that bank nationality and bank reach both vary significantly with the legal and financial development of the host nation. For example, firms appear to be much less likely to choose a host nation bank and more likely to choose a global bank when operating in the former socialist nations of Eastern Europe. Overall, our results suggest that the extent of future bank globalization may be significantly limited as many corporations continue to prefer local or regional banks for at least some of their services. The paper proceeds as follows. Section 2 reviews previous research on bank nationality and reach. 3 and 4 describe our data set and methodology, respectively. Section 5 presents the findings from our main empirical model and some robustness checks. Section 6 concludes with some implications of the findings and some important caveats.
نتیجه گیری انگلیسی
In this paper, we examine bank globalization along two dimensions – bank nationality and bank reach – using data on cash management services provided to foreign affiliates of large multinational corporations. These firms represent a significant portion of the potential market for global banks and should therefore be influential in determining the extent to which the banking industry will become globalized. The provision of cash management services to such firms represents a crucial “middle ground” of financial services that could be provided by a range of different institutions – from a small local bank that operates only in the host nation to a large global bank headquartered in a distant financial center but with a physical presence in the host nation. We investigate bank nationality and reach using a two-stage NMNL model in which bank nationality is of primary importance and may influence bank reach. Explanatory variables in the model include (1) host nation characteristics, (2) geographic, cultural, and financial differences between the home and host nations, and (3) attributes of the multinational corporations. The first two sets of variables are designed to reflect both the demand of the foreign affiliates of the multinational corporations for cash management services from banks of different nationalities and the willingness and ability of these banks to supply the services. The attributes of the corporations are assumed to affect both bank nationality and reach through the demand side alone. We find that nearly two-thirds of our sample firms choose a bank headquartered in the host nation and less than 20% select a bank from their home nation. This is consistent with a strong “concierge” effect that dominates the “home cookin” effect. That is, affiliates of multinational corporations often use banks that know the local market, culture, language, and regulatory conditions rather than banks that are more familiar with the conditions in the corporation’s home market, or have direct ties to the corporation in the home nation. The data also suggest that bank reach is strongly associated with bank nationality. Firms that use host nation banks for cash management services are less likely to use a global bank and more likely to use a local or regional bank. Moreover, corporations that use host nation banks also tend to use regional banks as they expand internationally, whereas those that use home nation banks tend to rely on global banks as they expand. These findings together suggest that local and regional banks may be better at delivering concierge services than global banks, and large, multinational corporations need more concierge services as they expand further from their home nation. Overall, the finding that multinational corporations rely on host nation banks with limited reach suggests the extent of globalization may remain limited. Our bank nationality and bank reach regressions also yield some additional interesting results about the likely determinants of bank globalization. For example, we find that the very low levels of financial development in the former socialist nations appear to have strong effects on both bank nationality and bank reach. Firms operating in the former socialist nations of Eastern Europe are more likely to use home nation or third nation banks rather than host nation banks, and are also more likely to choose banks with a global reach. We caution that these inferences are subject to several caveats. First, we acknowledge that the financial structure of the banking industry reflects some supply and demand factors that are not modeled here. For instance, implicit barriers to competition might limit the supply of cash management services in some nations and therefore reduce the choice set available to our sample firms. Second, because our sample is a “snapshot” of the European market in 1996, our data do not necessarily reflect the long-run, steady-state equilibrium. For instance, the introduction of the Euro in 1999 – and its subsequent adoption as a physical currency in 2002 – may have reduced the costs of offering financial services across the borders of European Monetary Union (EMU) nations, making it easier for home and third nation banks to compete with host nation banks.8 Third, our measurement of bank reach is somewhat arbitrary and Eurocentric – we may classify some banks as global that only have substantial reach within Europe.