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International Shock Transmission after the Lehman Brothers Collapse: Evidence from Syndicated Lending

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  • Ralph De Haas
  • Neeltje Van Horen

Abstract

After Lehman Brothers filed for bankruptcy in September 2008, cross-border bank lending contracted sharply. To explain the severity and variation in this contraction, we analyze detailed data on cross-border syndicated lending by 75 banks to 59 countries. We find that banks which had to write down sub-prime assets, refinance large amounts of long-term debt, and which experienced sharp declines in their market-to-book ratio, transmitted these shocks across borders by curtailing their lending abroad. While shocked banks differentiated between countries in much the same way as less constrained banks, they restricted their lending more to small borrowers.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.231
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 102 (2012)
Issue (Month): 3 (May)
Pages: 231-37

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Handle: RePEc:aea:aecrev:v:102:y:2012:i:3:p:231-37

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  1. Heitor Almeida & Murillo Campello & Bruno Laranjeira & Scott Weisbenner, 2009. "Corporate Debt Maturity and the Real Effects of the 2007 Credit Crisis," NBER Working Papers 14990, National Bureau of Economic Research, Inc.
  2. Ralph De Haas & Neeltje Van Horen, 2011. "Running for the exit: international banks and crisis transmission," Working Papers 124, European Bank for Reconstruction and Development, Office of the Chief Economist.
  3. Nicola Cetorelli & Linda S. Goldberg, 2010. "Global Banks and International Shock Transmission: Evidence from the Crisis," NBER Working Papers 15974, National Bureau of Economic Research, Inc.
  4. Chami, Ralph & Cosimano, Thomas F., 2010. "Monetary policy with a touch of Basel," Journal of Economics and Business, Elsevier, vol. 62(3), pages 161-175, May.
  5. Ivashina, Victoria & Scharfstein, David, 2010. "Bank lending during the financial crisis of 2008," Journal of Financial Economics, Elsevier, vol. 97(3), pages 319-338, September.
  6. Giannetti, Mariassunta & Laeven, Luc, 2011. "The Flight Home Effect: Evidence from the Syndicated Loan Market During Financial Crises," CEPR Discussion Papers 8337, C.E.P.R. Discussion Papers.
  7. Eric S. Rosengren & Joe Peek, 2000. "Collateral Damage: Effects of the Japanese Bank Crisis on Real Activity in the United States," American Economic Review, American Economic Association, vol. 90(1), pages 30-45, March.
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