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Violent Conflict and Cross-Border Lending

Author

Listed:
  • De Haas, Ralph
  • Mamonov, Mikhail
  • Popov, Alexander
  • Shala, Iliriana

Abstract

How do violent conflicts shape cross-border lending? Using syndicated loan data on 14,021 creditors and 97,169 firms across 179 countries, we document a dual response. Relative to domestic creditors, foreign lenders reduce overall lending by 27% (supply-driven) but increase lending to military-related sectors by 24% (demand-driven). This reallocation is concentrated among lenders with military-sector expertise but limited country specialization, and flows toward politically non-aligned conflict zones. Pre-conflict exposure to cross-border lenders is associated with divergent firm-level outcomes: military firms expand assets, revenues, and employment, while exposed civilian firms contract. Violent conflicts thus selectively redirect, rather than uniformly suppress, cross-border credit.

Suggested Citation

  • De Haas, Ralph & Mamonov, Mikhail & Popov, Alexander & Shala, Iliriana, 2024. "Violent Conflict and Cross-Border Lending," CEPR Discussion Papers 19743, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19743
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    Keywords

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    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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