Who Pays for Financial Crises? Price and Quantity Rationing of Different Borrowers by Domestic and Foreign Banks

48 Pages Posted: 10 Oct 2017 Last revised: 14 May 2019

See all articles by Allen N. Berger

Allen N. Berger

University of South Carolina - Darla Moore School of Business; Wharton Financial Institutions Center; European Banking Center

Tanakorn Makaew

Securities and Exchange Commission (SEC)

Rima Turk-Ariss

International Monetary Fund; Economic Research Forum

Multiple version iconThere are 2 versions of this paper

Date Written: May 12, 2019

Abstract

Financial crises result in price and quantity rationing of creditworthy borrowers. However, little is known about the relative severity of these two rationing types, which borrowers are rationed most, and differences between foreign and domestic banks. Our data on lenders, borrowers, relationships, and contract terms for over 18,000 business loans from 48 countries suggest that publicly-listed firms are more often price rationed, whereas privately-held firms are more frequently quantity rationed. We uncover further important differences between foreign and domestic banks and between U.S. and non-U.S. banks. We also find that financial crises change how banks price borrower risk.

Keywords: Credit Rationing, Foreign Banks, Financial Crises, Relationship Lending

JEL Classification: G01, G21, O16

Suggested Citation

Berger, Allen N. and Makaew, Tanakorn and Turk-Ariss, Rima, Who Pays for Financial Crises? Price and Quantity Rationing of Different Borrowers by Domestic and Foreign Banks (May 12, 2019). Available at SSRN: https://ssrn.com/abstract=3049979 or http://dx.doi.org/10.2139/ssrn.3049979

Allen N. Berger

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States
803-576-8440 (Phone)
803-777-6876 (Fax)

Wharton Financial Institutions Center

Philadelphia, PA 19104-6367
United States

European Banking Center

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tanakorn Makaew (Contact Author)

Securities and Exchange Commission (SEC) ( email )

450 Fifth Street, NW
Washington, DC 20549-1105
United States

Rima Turk-Ariss

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Economic Research Forum ( email )

21 Al-Sad Al-Aaly St.
(P.O. Box: 12311)
Dokki, Cairo
Egypt

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