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
Date Written: May 12, 2019
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: Suggested Citation