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Location strategies of multinational banking under risk and asymmetric information

Location strategies of multinational banking under risk and asymmetric information Purpose – Inspired by the recent opening up of the Chinese banking market and by the ensuing location strategies adopted by foreign banks, the purpose of this paper is to develop an empirical analysis on location strategies. The paper enriches the existing literature by including many important realistic aspects, some of which have never been analyzed in theory before, especially for firms entering an unfamiliar and risky foreign market. Design/methodology/approach – The authors carried out an empirical study on foreign banks' entry to the newly opened up Chinese banking market and modelled location strategies of foreign banks in China as a conditional logit problem, in which the dependent variable is the market chosen by an investor. To investigate the determinants of foreign banks' location choices in China, the authors collected data of foreign banks' entries into China during 1980‐2006. Findings – The main empirical results are: asymmetric information, firm size and entry sequence are significant determinants of foreign banks' location strategies. Originality/value – The paper presents a new set of results. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Nankai Business Review International Emerald Publishing

Location strategies of multinational banking under risk and asymmetric information

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Publisher
Emerald Publishing
Copyright
Copyright © 2013 Emerald Group Publishing Limited. All rights reserved.
ISSN
2040-8749
DOI
10.1108/20408741311323335
Publisher site
See Article on Publisher Site

Abstract

Purpose – Inspired by the recent opening up of the Chinese banking market and by the ensuing location strategies adopted by foreign banks, the purpose of this paper is to develop an empirical analysis on location strategies. The paper enriches the existing literature by including many important realistic aspects, some of which have never been analyzed in theory before, especially for firms entering an unfamiliar and risky foreign market. Design/methodology/approach – The authors carried out an empirical study on foreign banks' entry to the newly opened up Chinese banking market and modelled location strategies of foreign banks in China as a conditional logit problem, in which the dependent variable is the market chosen by an investor. To investigate the determinants of foreign banks' location choices in China, the authors collected data of foreign banks' entries into China during 1980‐2006. Findings – The main empirical results are: asymmetric information, firm size and entry sequence are significant determinants of foreign banks' location strategies. Originality/value – The paper presents a new set of results.

Journal

Nankai Business Review InternationalEmerald Publishing

Published: May 31, 2013

Keywords: China; Banks; Market entry; Multinational companies; Financial markets; Location strategy; Economic risk; Asymmetric information; Firm size; Entry sequence

References