The Determinants Of Foreign Location And Market-Entry Mode By Multinational Banks: A Simultaneous Approach

Abstract

The study aims to explain the determinants of banks’ choices of location of overseas activities and of market-entry mode (subsidiary, branch and representative office). Location of overseas activities and market-entry mode are considered as simultaneously determined. The determinants are based on the factors associated with the characteristics of the parent bank and host country. A 3SLS model is used to estimate these determinants. Based on sample of 63 banks from 18 countries in 2004, the results show that foreign location and market-entry mode are governed by the characteristics of both the host country and the parent bank. Our results also provide some answers about the impact of entry mode on location choice, and vice versa.