The location decision of foreign banks provides a good test how institutional differences affect cross-border investments. We collect detailed, bilateral data of bank ownership for 138 countries over 1995-2006. We then examine, using a newly constructed indicator, whether banks seek out those markets where institutional familiarity provides them with advantages over competitor banks. Using a difference-in-difference model, we find that institutional competitive advantage importantly drives location decisions, especially for M&As;. Results are robust to different samples, various econometric techniques and alternative institutional quality measures. We provide some policy lessons, including on the implication of increased cross-border banking among developing countries.