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Onshore guarantees for offshore loans and bank risk-taking: Evidences from Taiwanese banks

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  • Chen, Ting-Hsuan
  • Lu, Chia-Wu
  • Hsieh, Meng-Fen

Abstract

This research explores the issue of onshore guarantees for offshore loans, which are significant off-balance-sheet activities that have seldom been examined. Our research systematically reviews the literature on off-balance-sheet activities and cross-border interbank transactions and also discusses popular shadow-banking activities in recent times. Because of the high-risk characteristics of off-balance-sheet activities, our empirical work focuses on the relationship of onshore guarantees with offshore loans and bank risk-taking. We employ data of all Taiwanese banks doing the business of onshore guarantees for offshore loans in China during 2013–2017 and provide evidence that banks with more risk-taking have higher amounts of such guarantees. Furthermore, by sub-sample regression we find this phenomenon strongly exists in private banks and independent banks, indicating they are more sensitive to higher risk characteristics of the off-balance-sheet loans.

Suggested Citation

  • Chen, Ting-Hsuan & Lu, Chia-Wu & Hsieh, Meng-Fen, 2022. "Onshore guarantees for offshore loans and bank risk-taking: Evidences from Taiwanese banks," Research in International Business and Finance, Elsevier, vol. 60(C).
    • Handle: RePEc:eee:riibaf:v:60:y:2022:i:c:s0275531922000149
    DOI: 10.1016/j.ribaf.2022.101626
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    More about this item

    Keywords

    Onshore guarantees for offshore loans; Banks; Risk-taking; State-owned banks; Financial holding companies; Board size;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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