COMMERCIAL BANKS INTERNATIONALIZATION AND BUSINESS OUTCOMES IN THE NIGERIAN BANKING INDUSTRY

COMMERCIAL BANKS INTERNATIONALIZATION AND BUSINESS OUTCOMES IN THE NIGERIAN BANKING INDUSTRY

ABSTRACT

Internationalization is a key strategy in some Nigerian banks for growth and greater profit opportunities. This development had led banks to embark on international expansion by opening subsidiaries abroad. Banking reforms especially recapitalization policy, increased regulatory controls, stiff competition in the domestic market, reduced market share, has impacted on the profitability of commercial banks in Nigeria. This study examined commercial banks internationalization and business outcomes in the banking industry in Nigeria with particular reference to selected banks that have subsidiaries in foreign countries.

The study adopted survey research design. The target population comprised of 17200 top level managers of the five top commercial banks with wholly owned subsidiaries outside Nigeria and a stratified random sampling technique was used to select the sample size of 793. Data were collected using a self-administered structured questionnaire and validated for the study. Cronbach Alpha reliability for major constructs ranged between 0.84 and 0.91. The response rate was 96.8%. The data collected were analyzed using descriptive statistics, hypothesis one and two were tested using simple regression and hypothesis three and four were tested using Pearson correlation statistics.

The findings revealed that commercial banks internationalization had a significant relationship on business outcomes in the banking industry in Nigeria. Results indicated that location choices of internationalized Nigerian commercial banks had significant effect on business outcome (F1/766 = 31.725; R2 = 0.345; p< 0.05. Government policies on internationalization had significant effect on the business outcome of an internationalized commercial bank (F1/766 = 101.152; R2 = 0.117; p< 0.05). Commercial banks motives for internationalization had significant     relationship with business outcome (r=0.318; p< 0.05). Entry Mode had a significant relationship with business outcome of an internationalized commercial bank (r=0.778; p< 0.05).

The study concluded that internationalization resulted to positive business outcomes as internationalized banks benefited from growth in profitability, market share, increase in asset base and capitalization. The study recommends that banks seeking opportunities in foreign markets must conduct detailed feasibility studies to understand barriers to entry, factors that affect location choice, influence of government policies and select entry mode that ensures it can constantly compete in the foreign market.

Keywords:     Internationalization, Business Outcomes, Commercial banks, Transaction cost. Resource-based View, foreign direct investments.