Foreign Banking Expansion in Spain : An Empirical Analysis

This paper investigates the expansion of foreign bank's activities in Spain for the period 1988-1992. The eclectic theory framework is adopted. I hypothesize that the factors that make possible banking expansion abroad are bank's size and growth, foreign direct investment in Spain from the bank's country of origin, the bank's experience operating in a multinational environment, and proximity to the country of origin. I also introduce the organizational form chosen by the bank for carrying out its activities in Spain as an important factor in explaining foreign banking expansion. I test the former hypothesies using logistic regression. The results confirm the hypothesies proposed except for the bank's experience operating abroad which surprisingly does not affect foreign banking expansion in Spain. The probability to expand activities in Spain is higher for banks operating through branch or subsidiary than for banks which operate exclusively through representative offices