The Role of Information from International Bank Lending in Mutual Fund Equity Investing

56 Pages Posted: 24 Jan 2018

See all articles by Linda Allen

Linda Allen

Zicklin School of Business, Department of Economics and Finance, Baruch College - The City University of New York

Suparna Chakraborty

University of San Francisco

Sonali Hazarika

Zicklin School of Business, Department of Economics and Finance, Baruch College - The City University of New York

Chih-Huei (Debby) Banks

University of New Mexico

Date Written: September 2017

Abstract

In contrast to the literature involving U.S. bank lending domestically to U.S. firms, we find that affiliated U.S. banks’ mutual funds do not increase their holdings of equity in non-U.S. borrowing firms around new loan initiations. Mutual funds affiliated with lending banks have less equity investment and turnover in the stock of their non-U.S. borrowers as compared to non-lending bank or unaffiliated mutual funds. Reduced equity holdings increase loan spreads consistent with the preservation of the lending bank’s information monopoly, thereby encouraging further lending. Equity market turnover is most reduced when banks lend to firms in emerging nations.

Keywords: insider information, syndicated bank loans, international mutual fund investing

JEL Classification: G14, G21, G23

Suggested Citation

Allen, Linda and Chakraborty, Suparna and Hazarika, Sonali and Su, Chih-Huei (Debby), The Role of Information from International Bank Lending in Mutual Fund Equity Investing (September 2017). Baruch College Zicklin School of Business Research Paper No. 2018-01-01, Available at SSRN: https://ssrn.com/abstract=3107644 or http://dx.doi.org/10.2139/ssrn.3107644

Linda Allen (Contact Author)

Zicklin School of Business, Department of Economics and Finance, Baruch College - The City University of New York ( email )

17 Lexington Avenue
New York, NY 10010
United States

Suparna Chakraborty

University of San Francisco ( email )

2130 Fulton Street
San Francisco, CA 94117-1080
United States

HOME PAGE: http://chakrabortys.weebly.com

Sonali Hazarika

Zicklin School of Business, Department of Economics and Finance, Baruch College - The City University of New York ( email )

17 Lexington Avenue
New York, NY 10010
United States

HOME PAGE: http://https://zicklin.baruch.cuny.edu/faculty-profile/sonali-hazarika/

Chih-Huei (Debby) Su

University of New Mexico ( email )

MSC 05-3090
U of New Mexico
Albuquerque, NM 87131
United States

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