Running for the Exit? International Bank Lending During a Financial Crisis
Ralph De Haas
European Bank for Reconstruction and Development
Neeltje Van Horen
De Nederlandsche Bank
September 3, 2012
De Haas, R. and N. Van Horen (2013), Running for the exit? International bank lending during a financial crisis, Review of Financial Studies, 26(1), 244-285.
The global financial crisis and the related sharp reduction in cross-border credit have reignited the debate about the risks of financial globalization. We use loan-level data on lending by the largest international banks to their various countries of operation to examine how banks reduced cross-border credit after the collapse of Lehman Brothers. Country-, firm-, and bank-fixed effects allow us to disentangle credit supply and demand and to simultaneously control for the unobserved traits of banks as well as the countries and firms they lend to. We document substantial heterogeneity in the extent to which different banks retrenched from the same country: there was no blanket ‘run for the exit’. Instead, banks reduced credit less to markets that were geographically close; where they had more lending experience; where they operated a subsidiary; and where they were integrated into a network of domestic co-lenders. Deeper financial integration is associated with more stable cross-border credit during times of crisis.
Number of Pages in PDF File: 52
Keywords: Cross-border lending, bank-borrower closeness, syndicated lending
JEL Classification: F36, F42, F52, G15, G21, G28Accepted Paper Series
Date posted: October 28, 2011 ; Last revised: December 17, 2012
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