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Who Lends Before Banking Crises? Evidence from the International Syndicated Loan Market

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  • Mariassunta Giannetti

    (Stockholm School of Economics, 113 83 Stockholm, Sweden; and Swedish House of Finance, 113 50 Stockholm, Sweden; and Center for Economic and Policy Research, Washington, District of Columbia 20009; and European Corporate Governance Institute, 1000 Brussels, Belgium)

  • YeeJin Jang

    (University of New South Wales, Sydney, New South Wales 2052, Australia)

Abstract

Existing studies assume that all lenders have similar incentives to take on risks during different phases of the lending cycle. We show that foreign lenders and low market share lenders extend more credit in comparison with other lenders during lending booms leading to banking crises but not during other credit expansions. These less established lenders also shorten loan maturity and increase the amount of credit they extend to riskier borrowers without asking for collateral or imposing covenants and higher interest rates. Our results suggest that foreign lenders and low market share lenders contribute disproportionately to credit misallocation and risk accumulation in precrisis periods.

Suggested Citation

  • Mariassunta Giannetti & YeeJin Jang, 2025. "Who Lends Before Banking Crises? Evidence from the International Syndicated Loan Market," Management Science, INFORMS, vol. 71(3), pages 2289-2310, March.
    • Handle: RePEc:inm:ormnsc:v:71:y:2025:i:3:p:2289-2310
    DOI: 10.1287/mnsc.2022.03505
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    More about this item

    Keywords

    foreign banks; crises; credit booms; externalities;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • F3 - International Economics - - International Finance

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