The Determinants Affecting Korean Bank’s Foreign Market Location Decision

After the global financial crisis in 2008 sparked by the collapse of Lehman Brothers, rapidly weakened domestic banks in terms of profitability, integrity, and flexibility. The purpose of this study is to examine the factors that lead domestic banks to expand overseas. This study aims to explain the determinants of these bank’s decision to advance overseas operations, which could be categorized in two sets of factors: market opportunity and market competition. Focusing on the number of overseas projects that were undertaken by four representative banks of Korea, this study shows a positive relationship between the growth of potential target countries and their attractiveness for foreign banks. Furthermore, there is a negative relationship between the cultural distance, the less is the probability of moving to the new market. The results also show that the greater the number of overseas Korean residents and banks in the target country, the greater is the probability that a bank could advance to that location. By contrast, the decision to expand to a target country is not affected by the number of other Korean companies that advanced to the country previously. This study contributes to the field of international business research by empirically examining the factors that affected the expansion of the four most representative banks in South Korea.