Determinants of Multinational Banks.

The article discusses determinants of multinational banks (MNBs). A theoretical model has been developed by the author to explain the phenomenon of multi-national banks (MNBs). Several factors have been identified, which are instrumental for the growth of MNBs. Size of a bank, effective lending rate differentials and size of host banking market are found to be important determinants of MNB growth in the onshore market, whereas size of a bank is found to be an important determinant in the offshore market. No internalization advantage factors are found to be significant in this particular set of tests. One alternative explanation for this may be any internalization advantage effects that actually exist might have been subsumed under effects of ownership-specific advantages as quite frequently only "internalized" ownership-specific advantages are reflected in ex post bank performance data used in most empirical studies. If this is true, more powerful proxies for internalization advantage factors might have been able to separate internalization advantage effects from ownership-specific advantage effects. But the current level of bank data availability makes this extremely difficult to accomplish. This fact remains to be the most controversial aspect of the eclectic model in explaining MNBs empirically.