IDEAS home Printed from https://ideas.repec.org/a/eee/pacfin/v93y2025ics0927538x25002008.html
   My bibliography  Save this article

Foreign branch and bank lending decisions: Evidence from high-risk borrowers

Author

Listed:
  • Wu, Xufeng
  • Huang, Ying-Chen
  • Lin, Chih-Yung

Abstract

This paper investigates whether foreign branches of the top 100 multinational banks transmit superior soft information to their parent banks for cross-border lending decisions. We show that foreign banks with more local branches serve as lead arrangers in syndication loans and earn higher upfront fees. Also, these foreign banks charge higher spreads, offer smaller loans, and require more covenants and collateral. The reason is that these foreign banks often lend to high-risk borrowers because of their superior soft information. As a result, these high-risk borrowers have improved credit quality and profitability after obtaining these loans. Based on the financial crisis of 2007–2009, we adopt a difference-in-differences (DiD) framework to do a robustness check. Consistent with our hypothesis, we find that foreign banks with local branches are more likely to charge higher spreads to high-risk borrowers, especially during the crisis.

Suggested Citation

  • Wu, Xufeng & Huang, Ying-Chen & Lin, Chih-Yung, 2025. "Foreign branch and bank lending decisions: Evidence from high-risk borrowers," Pacific-Basin Finance Journal, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:pacfin:v:93:y:2025:i:c:s0927538x25002008
    DOI: 10.1016/j.pacfin.2025.102863
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0927538X25002008
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.pacfin.2025.102863?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:pacfin:v:93:y:2025:i:c:s0927538x25002008. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/pacfin .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.