Does the 'Foreignness' of Bank Loans Matter? Evidence from a New Dataset

Abstract

We analyze the heterogeneity of foreign bank loans in a newly constructed global dataset that explicitly distinguishes in a disaggregated loan-bank-firm setting between domestic loans and three categories of foreign loans: loans by subsidiaries of foreign banks, loans by foreign bank branches, and direct cross-border loans. We find that borrower characteristics and loan conditions often significantly differ across different foreign loan categories, with loans by foreign bank subsidiaries in many respects resembling domestic loans rather than other foreign loan categories. We also find pronounced non-monotonicities in loan conditions and borrower characteristics when moving from "less foreign" to "more foreign" bank loans.

Keywords: cross-border lending, syndicated loans

JEL Classification: G21, G32, F65