Financial Crises and the Composition of Cross-Border Lending

By Eugenio Cerutti, G. Hale, Camelia Minoiu. Social Science Research Network, 2014

118 citations recorded by the source corpus.

We examine the composition and drivers of cross-border bank lending between 1995 and 2012, distinguishing between syndicated and non-syndicated loans. We show that on-balance sheet syndicated loan exposures, which account for almost one third of total cross-border loan exposures, increased during the global financial crisis due to large drawdowns on credit lines extended before the crisis. Our empirical analysis of the drivers of cross-border loan exposures in a large bilateral dataset leads to three main results. First, banks with lower levels of capital favor syndicated over other kinds of cross-border loans. Second, borrower country characteristics such as level of development, economic size, and capital account openness, are less important in driving syndicated than non-syndicated loan activity, suggesting a diversification motive for syndication. Third, information asymmetries between lender and borrower countries became more binding for both types of cross-border lending activity during the recent crisis.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/2c2b555daea7006e2001851a49fec510c72eef67

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Citations in the corpus

Information asymmetry, leverage and firm value: Do crisis and growth matter? (2016, background): “Recent scholarly works in finance (e.g. Vithessonthi and Tongurai, 2015; Cerutti et al., 2015; Bremus and Fratzscher, 2015; Bergman and Hutchison, 2015; Cerutti, 2015; Kahle and Stulz, 2013; Begg, 2009) have attempted to shed light on the impact of the recent global financial crisis.”
The Euro and the Geography of International Debt Flows (2014, methodology): “Moreover, we make use of information on loan type and loan maturity to approximate the amount of syndicated loan exposures outstanding for each country pair and year, following methodology in Cerutti et al. (2014).”
Global liquidity and cross-border bank flows (2017, background): “For example, Consolidated data report the liabilities of domestic firms to domestic subsidiaries of foreign banks, but not the liabilities of subsidiaries of foreign banks towards their parents (see Cerutti et al., 2014, for more details on the BIS IBS data).”