Staying Close to Home? Foreign Bank Participation in Syndicated Loans
18 Pages Posted: 20 May 2010
Date Written: May 18, 2010
Abstract
We examine the propensity of Australian banks to participate in syndicated loans to corporate borrowers from 12 countries in the Asia-Pacific region. As in other studies of international asset allocation, we find that these banks participate more often, and more intensively, in loans made to Australian firms. However, much of this apparent bias can be attributed to differences in familiarity characteristics – legal systems, banking presence and distance from Australia. As these characteristics are likely to proxy for information availability, our results provide further support for the view that home bias phenomena are primarily due to information problems. The latter also affect syndicate structure: the component of the bias due to information asymmetries is associated with lead banks retaining a greater percentage of the loan and with a smaller syndicate size.
Keywords: home bias, syndicated loans, Asia-Pacific
JEL Classification: G11, G15, G21
Suggested Citation: Suggested Citation
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