Entry Mode Choices of Multinational Banks

Abstract

When expanding abroad, a multinational bank faces a trade-off between accessing a foreign country via cross border lending or a financial foreign direct investment, i.e. greenfield or acquisition entry. We analyze the entry mode choice of multinational banks and explicitely derive the entry mode pattern in the banking industry. Moreover, we show that in financially less developed host countries a trend towards cross border lending and acquisition entry exists. Greenfield entry prevails in banking markets on a higher development stage. Furthermore, we identify a tendency towards acquisition entry in small and greenfield entry in larger host countries.