How organizational and geographic complexity influence performance: Evidence from European banks
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Date
2021
Authors
Nyola, Annick Pamen
Sauvlat, Alain
Tarazi, Amine
Danışman, Gamze Öztürk
Journal Title
Journal ISSN
Volume Title
Publisher
Elsevier B.V.
Abstract
We empirically investigate how bank internationalization, organizational complexity, and geographical complexity stemming from foreign-affiliate type and geographic dispersion affect parent bank stability and profitability. We base our analysis on unique, hand-collected data for the worldwide locations of subsidiaries and branches of EU banks. Our results show that internationalization benefits bank stability by reducing default risk, and it is significantly associated with lower earnings volatility but poorer profitability. With regard to foreign organizational complexity, banks with both foreign subsidiaries and foreign branches are more stable than banks with foreign branches exclusively, which are more stable than banks with only foreign subsidiaries. Nevertheless, higher geographic complexity is associated with lower default risk, higher volatility in earnings, and higher profitability. Further investigations on the sovereign debt crisis and bank size indicate that the sovereign debt crisis in 2011 amplified the relationship and our findings mainly hold for small banks.
Description
Keywords
Bank profitability, Bank stability, Foreign organizational complexity, Geographical complexity, Internationalization
Turkish CoHE Thesis Center URL
Citation
3
WoS Q
Q1
Scopus Q
Q1
Source
Volume
55