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Better the Devil you Know: Home and Sectoral Biases in Bank Lending

Author

Listed:
  • Aurore BURIETZ

    (IESEG School of Management & LEM-CNRS 9221)

  • Loredana URECHE-RANGAU

    (Faculty of Economics and Business, Université de Picardie Jules Vernes, CRIISEA)

Abstract

This paper empirically investigates bank lending decisions and the extent to which they are influenced by specific preferences in terms of geographical location and industry. We study whether banks develop a field of expertise and focus on it, or whether they prefer to diversify during both normal and crisis times. We manually built an original database of syndicated loans for banks in the four major banking systems in the eurozone, to estimate the determinants of loans’ amounts between 2005 and 2013. We show that bank lending is influenced by both the geographical location and the industry of the borrower. Our findings highlight a domestic bias and a sectoral bias with banks lending more to their domestic borrowers and to industries they are specialized in.

Suggested Citation

  • Aurore BURIETZ & Loredana URECHE-RANGAU, 2020. "Better the Devil you Know: Home and Sectoral Biases in Bank Lending," Working Papers 2020-ACF-02, IESEG School of Management.
    • Handle: RePEc:ies:wpaper:f202002
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    Cited by:

    1. Bertrand, Jérémie & Burietz, Aurore, 2023. "(Loan) price and (loan officer) prejudice," Journal of Economic Behavior & Organization, Elsevier, vol. 210(C), pages 26-42.
    2. Hüttl, Pia & Kaldorf, Matthias, 2024. "The transmission of bank liquidity shocks: Evidence from the Eurosystem collateral framework," Discussion Papers 04/2024, Deutsche Bundesbank.
    3. Aurore Burietz & Kim Oosterlinck & Ariane Szafarz, 2025. "Hold-up in Syndicated Lending: Why Do Bank Relationships Lead to Higher Costs for High-Quality Firms?," Working Papers CEB 25-005, ULB -- Universite Libre de Bruxelles.
    4. Burietz, Aurore & Picault, Matthieu, 2023. "To lend or not to lend? The ECB as the ‘intermediary of last resort’," Economic Modelling, Elsevier, vol. 122(C).

    More about this item

    Keywords

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    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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