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The effect of banking regulation on cross-border lending

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  • Fidrmuc, Jarko
  • Hainz, Christa

Abstract

Banking regulations often differ between countries: Some regulators require banks to document their evaluation of firms’ creditworthiness, which determines the banks’ choice of lending technology. In a theoretical model, we study how differences in regulation influence competition between domestic and foreign banks and analyze the effect of regulatory harmonization on cross-border lending. We predict that lending rates are lower and access to credit is easier for firms in a border region if the national regulations differ. Using unique bank- and firm-level data from Germany, we show that firms in a border region have better access to credit if regulation differs.

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Bibliographic Info

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

Volume (Year): 37 (2013)
Issue (Month): 5 ()
Pages: 1310-1322

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Handle: RePEc:eee:jbfina:v:37:y:2013:i:5:p:1310-1322

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Keywords: Bank regulations; Cross-border lending; SMEs; Difference-in-difference estimation;

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Cited by:
  1. Leonardo Gambacorta & Adrian Van Rixtel, 2013. "Structural bank regulation initiatives: approaches and implications," BIS Working Papers 412, Bank for International Settlements.

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