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Foreign banks in syndicated loan markets

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Author Info

  • Haselmann, Rainer
  • Wachtel, Paul

Abstract

Foreign banks play a prominent role in syndicated loan markets. In this paper we examine foreign banks' motives in participating in cross-border deals in 25 European countries. We find that usual explanations of foreign banking activities can only account partly for the high rate of foreign involvement in syndicated loan markets. The usual argument is that foreign banks are at a disadvantage because they lack soft information and thus they tend to lend to more transparent firms compared to their domestic counterparts. We find that this relationship only holds in relatively small financial systems. We illustrate different motivations for the large amount of cross border lending in large developed markets. In these markets foreign banks tend to lend to especially risky borrowers and projects.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 35 (2011)
Issue (Month): 10 (October)
Pages: 2679-2689

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Handle: RePEc:eee:jbfina:v:35:y:2011:i:10:p:2679-2689

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Web page: http://www.elsevier.com/locate/jbf

Related research

Keywords: Foreign banks Syndicated lending Small financial systems;

References

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Cited by:
  1. Knyazeva, Anzhela & Knyazeva, Diana, 2012. "Does being your bank’s neighbor matter?," Journal of Banking & Finance, Elsevier, vol. 36(4), pages 1194-1209.

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