IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Bank Lending, Bank Capital Regulation and Efficiency of Corporate Foreign Investment

  • Diemo Dietrich
  • Achim Hauck

In this paper we study interdependencies between corporate foreign investment and the capital structure of banks. By committing to invest predominantly at home, firms can reduce the credit default risk of their lending banks. Therefore, banks can refinance loans to a larger extent through deposits thereby reducing firms’ effective financing costs. Firms thus have an incentive to allocate resources inefficiently as they then save on financing costs. We argue that imposing minimum capital adequacy for banks can eliminate this incentive by putting a lower bound on financing costs. However, the Basel II framework is shown to miss this potential.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.iwh-halle.de/e/publik/disc/4-07.pdf
Download Restriction: no

Paper provided by Halle Institute for Economic Research in its series IWH Discussion Papers with number 4.

as
in new window

Length:
Date of creation: Mar 2007
Date of revision:
Handle: RePEc:iwh:dispap:4-07
Contact details of provider: Postal: Kleine Märkerstrasse 8, 06108 Halle (Saale)
Phone: (0345) 7753-60
Fax: (0345) 7753-820
Web page: http://www.iwh-halle.de

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Repullo, Rafael & Suarez, Javier, 2003. "Loan Pricing Under Basel Capital Requirements," CEPR Discussion Papers 3917, C.E.P.R. Discussion Papers.
  2. Michael W. Klein & Joe Peek & Eric S. Rosengren, 2002. "Troubled Banks, Impaired Foreign Direct Investment: The Role of Relative Access to Credit," American Economic Review, American Economic Association, vol. 92(3), pages 664-682, June.
  3. David S. Scharfstein & Jeremy C. Stein, 1997. "The Dark Side of Internal Capital Markets: Divisional Rent-Seeking and Inefficient Investment," NBER Working Papers 5969, National Bureau of Economic Research, Inc.
  4. Brusco, Sandro & Panunzi, Fausto, 2000. "Reallocation of Corporate Resources and Managerial Incentives in Internal Capital Markets," CEPR Discussion Papers 2532, C.E.P.R. Discussion Papers.
  5. Douglas W. Diamond & Raghuram G. Rajan, 1999. "A Theory of Bank Capital," NBER Working Papers 7431, National Bureau of Economic Research, Inc.
  6. Franklin Allen & Elena Carletti & Robert Marquez, 0. "Credit Market Competition and Capital Regulation," Review of Financial Studies, Society for Financial Studies, vol. 24(4), pages 983-1018.
  7. Hart, Oliver & Moore, John, 1994. "A Theory of Debt Based on the Inalienability of Human Capital," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 841-79, November.
  8. Bertrand Rime, 2005. "Will Basel II Lead to a Specialization of Unsophisticated Banks on High-Risk Borrowers?," International Finance, Wiley Blackwell, vol. 8(1), pages 29-55, 07.
  9. Roman Inderst & Holger M. Müller, 2003. "Internal versus External Financing: An Optimal Contracting Approach," Journal of Finance, American Finance Association, vol. 58(3), pages 1033-1062, 06.
  10. Mihir A. Desai & C. Fritz Foley & James R. Hines, 2004. "A Multinational Perspective on Capital Structure Choice and Internal Capital Markets," Journal of Finance, American Finance Association, vol. 59(6), pages 2451-2487, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:iwh:dispap:4-07. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Hubert Gabrisch)

The email address of this maintainer does not seem to be valid anymore. Please ask Hubert Gabrisch to update the entry or send us the correct address

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.