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
Date Written: April 10, 2020
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: Suggested Citation