Abstract
In international expansion, staff localization helps Chinese commercial banks to provide services to meet local needs. This paper explores the mediation effect of staff localization and refines the measurement of bank’s overseas performance, to reveal the transmit channel of how the degree of internationalization (DOI) affects bank’s overseas performance. With data from 2009 to 2015 of China’s top five banks as the sample to build a panel data model, the result suggests that staff localization fully mediates the relationship between DOI and bank’s overseas performance, and DOI exercises positive effect on the overseas performance of intermediary business, but no significant effect on the overseas performance of deposit/loan business. Implications and suggestions for bank’s overseas practice are discussed.
Highlights
Along with economic integration, institutional transition, financial liberalization as well as other causes, especially a substantial increase in the presence of foreign banks in China, some Chinese banks expanded their business across borders to increase market share and competitiveness (Chen et al, 2017)
Chinese banks adapt to the dynamic external environment by staff localization, which can help overcome the disadvantages of operating at a distance and in unfamiliar settings (Hymer, 1976)
The results show that degree of internationalization (DOI) has a direct positive effect on the overseas performance of the deposit/loan business, but the intermediary role of staff localization is insignificant
Summary
Institutional transition, financial liberalization as well as other causes, especially a substantial increase in the presence of foreign banks in China, some Chinese banks expanded their business across borders to increase market share and competitiveness (Chen et al, 2017). Chinese banks adapt to the dynamic external environment by staff localization, which can help overcome the disadvantages of operating at a distance and in unfamiliar settings (Hymer, 1976). In this process, the expertise and ideas brought by local employees strengthen the banks’ service and innovation ability, improving the overseas operation of the banking business. The existing literatures mainly focus on the analysis of the direct impact of internationalization degree on bank performance, and rarely consider the transmission path, namely the intermediary role of staff localization
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