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The Determinants of Cross-Border Lending in the Euro Zone

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  • Sylvia Heuchemer

    (Cologne University of Applied Sciences Claudiusstr.1, Köln 50678, Germany)

  • Stefanie Kleimeier

    ([1] Limburg Institute of Financial Economics, Maastricht University, Tongersestraat 53, LM Maastricht 6211, The Netherlands[2] METEOR, Maastricht University, Tongersestraat 53, LM Maastricht 6211, The Netherlands)

  • Harald Sander

    ([1] Cologne University of Applied Sciences Claudiusstr.1, Köln 50678, Germany[2] METEOR, Maastricht University, Tongersestraat 53, LM Maastricht 6211, The Netherlands)

Abstract

We investigate the determinants of cross-border lending in the euro zone with a focus on the potentially limiting role of cultural and political factors. Employing a unique data set of European cross-border loans, the study uses various specifications of gravity models, which are subsequently augmented by societal proxies. Although trade-theoretic and financial development reasoning can explain part of the surge in cross-border lending, we demonstrate that distance and borders still matter. Moreover, we identify cultural differences and different legal family origin as important barriers to further integration in the euro zone.

Suggested Citation

  • Sylvia Heuchemer & Stefanie Kleimeier & Harald Sander, 2009. "The Determinants of Cross-Border Lending in the Euro Zone," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 51(4), pages 467-499, December.
  • Handle: RePEc:pal:compes:v:51:y:2009:i:4:p:467-499
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    Cited by:

    1. Fidrmuc, Jarko & Hainz, Christa, 2013. "The effect of banking regulation on cross-border lending," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1310-1322.
    2. Straetmans, Stefan & Chaudhry, Sajid M., 2015. "Tail risk and systemic risk of US and Eurozone financial institutions in the wake of the global financial crisis," Journal of International Money and Finance, Elsevier, vol. 58(C), pages 191-223.
    3. Duijm, Patty & Schoenmaker, Dirk, 2017. "European Banks Straddling Borders: Risky or Rewarding?," CEPR Discussion Papers 12159, C.E.P.R. Discussion Papers.
    4. Sander, Harald & Kleimeier, Stefanie & Heuchemer, Sylvia, 2016. "The resurgence of cultural borders during the financial crisis: The changing geography of Eurozone cross-border depositing," Journal of Financial Stability, Elsevier, vol. 24(C), pages 12-26.
    5. Sander, Harald & Kleimeier, Stefanie & Heuchemer, Sylvia, 2013. "E(M)U effects in global cross-border banking," Economics Letters, Elsevier, vol. 118(1), pages 91-93.
    6. Anton, Sorin Gabriel & Avadanei, Andreea, 2010. "The implications of European retail banking integration on small and medium-sized enterprises financing. An overview," MPRA Paper 28660, University Library of Munich, Germany.
    7. Kleimeier, Stefanie & Chaudhry, Sajid M., 2015. "Cultural differences and the structure of loan syndicates," Finance Research Letters, Elsevier, vol. 15(C), pages 115-124.
    8. Kleimeier S. & Qi S. & Sander H., 2015. "Deposit insurance in times of crises : safe haven or regulatory arbitrage?," Research Memorandum 026, Maastricht University, Graduate School of Business and Economics (GSBE).
    9. Böninghausen, Benjamin & Köhler, Matthias, 2015. "Diversification and determinants of international credit portfolios: Evidence from German banks," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 57-75.
    10. Kleimeier S. & Sander H. & Heuchemer S., 2014. "The resurgence of cultural borders in international finance during the financial crisis: Evidence from Eurozone cross-border depositing," Research Memorandum 013, Maastricht University, Graduate School of Business and Economics (GSBE).
    11. Francesca Arnaboldi & Barbara Casu, 2012. "Corporate Governance in European Banking," Chapters,in: Research Handbook on International Banking and Governance, chapter 31 Edward Elgar Publishing.

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