*We thank two anonymous referees for helpful comments and suggestions that improved the paper. We also thank Giuliano Iannotta, Adrian Tschoegl, Michael Ermann, Reinhard Schmidt, Felix Noth, Todd Gormley, Iftekhar Hasan, John Bonin, seminar audiences at the Wharton School and Goethe University, and participants and discussants at the Ifo/CESifo and ACES Conference on Banking and the Institutions in Munich and the 2010 Financial Intermediation Research Society Conference in Florence. We are grateful to CAREFIN at the Bocconi University and CESifo for financial support. This work was substantially completed while Oskar Kowalewski was under the Program Support for International Mobility of Scientists from the Polish Ministry of Science and Higher Education at the Wharton Financial Institutions Center.
Why Do Foreign Banks Withdraw from Other Countries?*
Version of Record online: 3 APR 2011
© 2011 Blackwell Publishing Ltd
Volume 14, Issue 1, pages 67–102, Spring 2011
How to Cite
Hryckiewicz, A. and Kowalewski, O. (2011), Why Do Foreign Banks Withdraw from Other Countries?. International Finance, 14: 67–102. doi: 10.1111/j.1468-2362.2011.01275.x
- Issue online: 28 APR 2011
- Version of Record online: 3 APR 2011
This paper describes trends in foreign bank ownership across the world and, for the first time, presents empirical evidence of the causes of multinational bank exits from other countries. Using panel data for 149 closed or divested foreign bank subsidiaries across 54 countries from 1997 to 2009, we show that the problems encountered by subsidiaries were not the main cause of divestment by parent banks. Based on data for the parent banks of the closed subsidiaries, the results show that these parent banks reported significant financial weaknesses before closing their international operations. Therefore, we conclude that a multinational bank's decision to close or sell a subsidiary in another country is motivated by problems in the home country, with the weak performance of the foreign subsidiary in the host country being a less relevant factor.