The relationship between bank revenue composition and bank risk in Australia is modeled using data drawn from Australian bank confidential regulatory returns. It is found that those banks with lower levels of non-interest income and higher revenue concentration are less risky, consistent with previous international evidence. Evidence is also found supportive of increased risk due to too-big-to-fail effects, with this risk increase being offset by a decline in large bank risk after the crisis of 2007–2008. Non-interest income is generally found to be risk increasing, but some types of non-interest income are risk reducing when bank specialization effects are considered. It is also found that the 2008 financial crisis changed some aspects of the relationship between bank risk and revenue composition.

The role of national governance upon bank-level risk in the Asian region is analysed. Improvements in national governance are risk reducing at the bank level in developed nations in the Asian region, and over the longer run for those nations affected by the Asian Financial Crisis. A U-shaped relationship between bank risk and bank capital is found, and it is argued that the risk reducing impact of increased capital holdings is close to satiation for developed nations in particular. Evidence of risk seeking due to ‘too big to fail’ effects is observed; with improved national governance able to partially offset some of the moral hazard due to size in developed nations, but not in developing nations. In developing nations increased size interacts with improved national governance to result in increased bank risk.

This paper develops and tests a model that integrates the existing multinational bank literature with the domestic bank profits literature. Using data for Australia, this paper demonstrates that an integrated model results in a small increase in explanatory power when compared to models drawn solely from the multinational banking literature. The paper finds that profits are a negative function of competitor market share and bank licence status, and a positive function of Australian size and home GDP growth. It is argued that there is incomplete integration between the market segments of domestic and multinational banks due to the first mover advantages of incumbent banks.

This study extends the existing literature of international banking by constructing a model of foreign intermediaries in Australia. An unresolved question is establishing those factors that result in banking across borders. While a variety of theories attempt to explain international banking, empirical tests are sparse (Mahajan, A., Rangan, N., Zardkoohi, A., 1996. Journal of Banking and Finance 20, 283–306). This study considers if the results to date apply in non US settings. Foreign bank size was found to be a positive function of bank licence, parent size and time in Australia, and a negative function of Australian net interest margins and fees. The negative sign on net interest margins and fees is consistent with De Young, R., Nolle, D., 1996. Journal of Money, Credit and Banking 28, 622–636. Foreign bank profits were a positive function of Australian net interest margins and fees. There was limited evidence of defensive expansion. This paper concludes that foreign bank size is explained well by the existing theories of international banking, but a wider model is appropriate for foreign bank profits.

The factors determining foreign bank efficiency are investigated using a three stage research method. It is found that host market incumbency reduces efficiency of foreign banks in Australia, resulting in over use of inputs. Factors underlying the limited global advantage hypothesis of Berger et al. [Berger, Allen N., DeYoung, Robert, Genay, Hesna, Udell, Gregory F., 2000. Globalisation of financial institutions: Evidence from cross-border banking performance. Brookings-Wharton Papers on Financial Service 3, 23–120] are identified, in that nationality specific factors represented by dummy variables are not significant once other relevant effects are controlled for. Parent profitability is not found to result in increased host nation efficiency, while parent credit rating effects are mixed. Some evidence is presented that banks from more financially sophisticated nations are more efficient. The implications of these results are explored from the perspectives of bank management and bank regulators.

This study considers the impact of foreign bank entry on banking efficiency in Australia during the post-deregulation period 1988–2001. Using Data Envelopment Analysis, Malmquist Indices and stochastic frontier analysis, we find foreign banks more efficient than domestic banks, which however did not result in superior profits. Major Australian banks have used size as a barrier to entry to new entrants. Furthermore, bank efficiency has increased post-deregulation and the competition resulting from diversity in bank types was important to prompt efficiency improvements. Finally, the recession of the early 1990s resulted in a distinct shift in the process of efficiency changes.