Concerted Lending: Did Large Banks Bear the Burden?
A game-theoretic model of lending with banks heterogeneous by size is introduced in which atomistic small banks free ride on the relending efforts of a large bank. An empirically-testable corollary conclusion suggests that "news" concerning the underlying economic condition of the debtor nation will have a greater impact on the large bank. This empirical prediction is validated for the Latin American Crisis period using evidence from long-term bond spread data. Poolings of cross-sectional time-series data reveal that the equity values of large banks are relatively more sensitive to adverse "news" concerning the quality of Latin American loans. Copyright 1992 by Ohio State University Press.
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Volume (Year): 24 (1992)
Issue (Month): 4 (November)
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