Financial Reforms and The Differential Impact of Foreign versus Domestic Banking Relationships on Firm Value

Handbook of Financial Econometrics, Mathematics, Statistics, and Machine Learning, Chapter 25, ed. by Cheng-Few Lee, World Scientific Publishing Co. Ltd. ISBN: 978-981-12-0238-4

Posted: 6 May 2020

See all articles by Hai-Chin Yu

Hai-Chin Yu

Chung Yuan Christian University

Cheng-Few Lee

Rutgers University, Newark, School of Business-Newark, Department of Finance & Economics

Ben J. Sopranzetti

Rutgers Business School: Newark and New Brunswick

Date Written: April 10, 2020

Abstract

This study documents a substantial difference in impact on an emerging market firm’s value due to its use of foreign bank debt relative to domestic bank debt. It finds a positive association between the use of collateral by foreign banks and firm value, however, finds no such corresponding association for the use of collateral by domestic banks. The results suggest that as an emerging market’s banking system matures and becomes more sophisticated, the differences between the information contained in local versus foreign bank lending diminishes; this diminishment erodes the differential impact on firm value of foreign versus local bank lending.

Keywords: foreign bank relationships, foreign bank debt, financial reform

JEL Classification: G21, L11, L14

Suggested Citation

Yu, Hai-Chin and Lee, Cheng-Few and Sopranzetti, Ben J., Financial Reforms and The Differential Impact of Foreign versus Domestic Banking Relationships on Firm Value (April 10, 2020). Handbook of Financial Econometrics, Mathematics, Statistics, and Machine Learning, Chapter 25, ed. by Cheng-Few Lee, World Scientific Publishing Co. Ltd. ISBN: 978-981-12-0238-4, Available at SSRN: https://ssrn.com/abstract=3572554

Hai-Chin Yu

Chung Yuan Christian University ( email )

22 Pu-Jen,Pu-chung Li
Chung-Li, Taiwan 32023
Taiwan
886 3 265 5209 (Phone)
886 3 265 5299 (Fax)

Cheng-Few Lee

Rutgers University, Newark, School of Business-Newark, Department of Finance & Economics ( email )

111 Washington Avenue
Newark, NJ 07102
United States
732-445-3907 (Phone)
732-445-5927 (Fax)

Ben J. Sopranzetti (Contact Author)

Rutgers Business School: Newark and New Brunswick ( email )

100 Rockafeller Rd
Piscataway, NJ 08854
United States

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