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"Lending by example": Direct and indirect effects of foreign banks in emerging markets


Giannetti, Mariassunta; Ongena, Steven (2012). "Lending by example": Direct and indirect effects of foreign banks in emerging markets. Journal of International Economics, 86(1):167-180.

Abstract

Using a novel dataset that allows us to trace the bank relationships of a sample of mostly unlisted firms, we explore which borrowers are able to benefit from foreign bank presence in emerging markets. Our results suggest that the limits to financial integration are less tight than the static picture of firm-bank relationships implies. Even though foreign banks are more likely to engage large and foreign-owned firms, after an acquisition, a bank is 20% less likely to terminate a relationship with a firm if the acquirer is foreign rather than domestic. Most importantly, within a credit market, firms appear to have the same access to financial loans and ability to invest whether they borrow from a foreign bank or not, while foreign banks benefit all firms by indirectly enhancing credit access.

Abstract

Using a novel dataset that allows us to trace the bank relationships of a sample of mostly unlisted firms, we explore which borrowers are able to benefit from foreign bank presence in emerging markets. Our results suggest that the limits to financial integration are less tight than the static picture of firm-bank relationships implies. Even though foreign banks are more likely to engage large and foreign-owned firms, after an acquisition, a bank is 20% less likely to terminate a relationship with a firm if the acquirer is foreign rather than domestic. Most importantly, within a credit market, firms appear to have the same access to financial loans and ability to invest whether they borrow from a foreign bank or not, while foreign banks benefit all firms by indirectly enhancing credit access.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > Finance
Social Sciences & Humanities > Economics and Econometrics
Language:English
Date:January 2012
Deposited On:24 Nov 2020 12:43
Last Modified:25 Nov 2020 21:01
Publisher:Elsevier
ISSN:0022-1996
OA Status:Closed
Publisher DOI:https://doi.org/10.1016/j.jinteco.2011.08.005
Official URL:http://www.sciencedirect.com/science/article/pii/S0022199611000912
Other Identification Number:merlin-id:11777

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