Who Lends Before Banking Crises? Evidence from the International Syndicated Loan Market

61 Pages Posted: 17 Dec 2020 Last revised: 14 Nov 2022

See all articles by Mariassunta Giannetti

Mariassunta Giannetti

Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swedish House of Finance

Yeejin Jang

UNSW Australia Business School, School of Banking and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: November 13, 2022

Abstract

Existing theories and empirical studies often assume that all lenders have similar incentives to take on risks in different phases of the lending cycle. We show that foreign lenders and low-market-share lenders extend more credit in comparison to other lenders during lending booms leading to banking crises, but not during other credit expansions. These less established lenders also increase the amount of credit they extend to riskier borrowers, without asking for collateral or imposing covenants and higher interest rates. Our results suggest that foreign lenders and low-market-share lenders contribute disproportionately to risk accumulation in pre-crisis periods.

Keywords: Foreign banks, crises, credit booms

JEL Classification: G21, F3

Suggested Citation

Giannetti, Mariassunta and Jang, Yeejin, Who Lends Before Banking Crises? Evidence from the International Syndicated Loan Market (November 13, 2022). Swedish House of Finance Research Paper No. 21-2, Available at SSRN: https://ssrn.com/abstract=3739393 or http://dx.doi.org/10.2139/ssrn.3739393

Mariassunta Giannetti (Contact Author)

Stockholm School of Economics ( email )

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HOME PAGE: http://sites.google.com/site/mariassuntagiannetti/Home

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

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Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Yeejin Jang

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

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