Geographic diversification and bank lending during crises

50 Pages Posted: 11 Dec 2017 Last revised: 16 Jun 2020

See all articles by Sebastian Doerr

Sebastian Doerr

Bank for International Settlements

Philipp Schaz

Humboldt University of Berlin; German Institute for Economic Research (DIW Berlin)

Multiple version iconThere are 2 versions of this paper

Date Written: March 5, 2019

Abstract

We classify a large sample of banks according to the geographic diversification of their international syndicated loan portfolio. We show that diversified banks maintain higher loan supply during banking crises in borrower countries. Positive loan supply effects lead to higher firm investment and employment growth. Diversified banks are stabilizing due to their ability to raise additional funding during times of distress. Distinguishing banks by nationality reveals that diversified domestic banks are a stable source of funding, while foreign banks with little diversification are fickle. Findings suggest that declining financial integration makes countries more vulnerable to local financial shocks.

Keywords: Global Banks, Diversification, Syndicated Loans, Financial Crisis

JEL Classification: F30, G2

Suggested Citation

Doerr, Sebastian and Schaz, Philipp, Geographic diversification and bank lending during crises (March 5, 2019). Journal of Financial Economics, Accepted for publication. Available at SSRN: https://ssrn.com/abstract=3082945 or http://dx.doi.org/10.2139/ssrn.3082945

Sebastian Doerr

Bank for International Settlements ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

HOME PAGE: http://www.sdoerr.com

Philipp Schaz (Contact Author)

Humboldt University of Berlin ( email )

Unter den Linden 6
Berlin, AK Berlin 10099
Germany

HOME PAGE: http://www.philippschaz.com/

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

HOME PAGE: http://www.philippschaz.com

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