Foreign and Domestic Loans over the Business Cycle

41 Pages Posted: 27 Mar 2019 Last revised: 13 Feb 2020

See all articles by Jens Forssbæck

Jens Forssbæck

Lund University - Department of Economics

Frederik Lundtofte

Lund University - Department of Economics

Martin Strieborny

University of Glasgow - Adam Smith Business School

Anders Vilhelmsson

Lund University - Department of Economics

Date Written: January 31, 2020

Abstract

During good economic times, the likelihood of obtaining a loan from a foreign bank increases in the borrower firm's opacity. During bad economic times (recessions), this relation reverses as the probability of obtaining a foreign loan decreases for all firms, but drops disproportionately for opaque borrowers. Independently of the business cycle, firms with a higher share of foreign sales are more likely to obtain a foreign loan. We derive these predictions in a formal theoretical framework and confirm them empirically using a loan-bank-firm level dataset covering forty countries during the 1999-2016 period.

Keywords: foreign banks, cross-border loans, business cycles

JEL Classification: G21, E44, F65

Suggested Citation

Forssbaeck, Jens and Lundtofte, Frederik and Strieborny, Martin and Vilhelmsson, Anders, Foreign and Domestic Loans over the Business Cycle (January 31, 2020). Available at SSRN: https://ssrn.com/abstract=3338283 or http://dx.doi.org/10.2139/ssrn.3338283

Jens Forssbaeck (Contact Author)

Lund University - Department of Economics ( email )

P.O. Box 7082
S-220 07 Lund
Sweden

Frederik Lundtofte

Lund University - Department of Economics ( email )

P.O. Box 7082
Lund
Sweden
+46 46 222 4970 (Phone)
+46 46 222 4118 (Fax)

HOME PAGE: http://www.nek.lu.se/nekflu

Martin Strieborny

University of Glasgow - Adam Smith Business School ( email )

Glasgow, Scotland
United Kingdom

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

Anders Vilhelmsson

Lund University - Department of Economics ( email )

Lund
Sweden

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
26
Abstract Views
313
PlumX Metrics