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Are Banks Different? Evidence from International Data

  • Claudia M. Buch

Pecking order models of international finance suggest that countries should become less reliant on international bank lending as they develop. Reduced information costs are one of the factors behind this trend towards disintermediation. This paper presents a simple model on the choice between bank debt and bond finance which builds on Rajan (1992), and it uses two new datasets to test the implications, focusing on bilateral cross-border bank claims and bond holdings. We find support for the hypothesis that the state of development of an economy lowers the share of bank finance. However, evidence on the importance of variables which more directly measure information costs is less clear-cut.

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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1012.

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Length: 27 pages
Date of creation: Nov 2000
Date of revision:
Handle: RePEc:kie:kieliw:1012
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  1. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
  2. Maurice Obstfeld & Kenneth Rogoff & Ben Bernanke & Kenneth Rogoff, . "The Six Major Puzzles in International Macroeconomics: Is there a Common Cause?," Working Paper 32326, Harvard University OpenScholar.
  3. R Portes & H Rey, 2000. "The Determinants Of Cross-Border Equity Flows," CEP Discussion Papers dp0446, Centre for Economic Performance, LSE.
  4. Barry Eichengreen & Ashoka Mody, 1999. "Lending Booms, Reserves, and the Sustainability of Short-Term Debt: Inferences from the Pricing of Syndicated Bank Loans," NBER Working Papers 7113, National Bureau of Economic Research, Inc.
  5. Woochan Kim & Shang-Jin Wei, 1999. "Foreign Portfolio Investors Before and During a Crisis," NBER Working Papers 6968, National Bureau of Economic Research, Inc.
  6. Razin, Assaf & Sadka, Efraim & Yuen, Chi-Wa, 1998. "A pecking order of capital inflows and international tax principles," Journal of International Economics, Elsevier, vol. 44(1), pages 45-68, February.
  7. Moshirian, Fariborz & Van der Laan, Alex, 1998. "Trade in financial services and the determinants of banks' foreign assets," Journal of Multinational Financial Management, Elsevier, vol. 8(1), pages 23-38, January.
  8. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2000. "External Capital Structure: Theory and Evidence," CEPR Discussion Papers 2583, C.E.P.R. Discussion Papers.
  9. Rafael La Porta & Florencio Lopez-deSilanes & Andrei Shleifer, 2000. "Government Ownership of Banks," Harvard Institute of Economic Research Working Papers 1890, Harvard - Institute of Economic Research.
  10. Benjamin Hermalin & Andrew K. Rose & Peter M. Garber & Andrew Crockett & David W. Mullins, Jr, 1999. "Risks to Lenders and Borrowers in International Capital Markets," NBER Chapters, in: International Capital Flows, pages 363-420 National Bureau of Economic Research, Inc.
  11. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
  12. Schnitzer, Monika, 1997. "Debt vs. Foreign Direct Investment: The Impact of Sovereign Risk on the Structure of International Capital Flows," CEPR Discussion Papers 1608, C.E.P.R. Discussion Papers.
  13. Fernandez-Arias, Eduardo & DEC, 1994. "The new wave of private capital inflows : push or pull?," Policy Research Working Paper Series 1312, The World Bank.
  14. Linda L. Tesar & Ingrid M. Werner, 1992. "Home Bias and the High Turnover," NBER Working Papers 4218, National Bureau of Economic Research, Inc.
  15. Brennan, Michael J & Cao, H Henry, 1997. " International Portfolio Investment Flows," Journal of Finance, American Finance Association, vol. 52(5), pages 1851-80, December.
  16. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  17. Rajan, Raghuram G, 1992. " Insiders and Outsiders: The Choice between Informed and Arm's-Length Debt," Journal of Finance, American Finance Association, vol. 47(4), pages 1367-400, September.
  18. Diamond, Douglas W., 1993. "Seniority and maturity of debt contracts," Journal of Financial Economics, Elsevier, vol. 33(3), pages 341-368, June.
  19. Zhaohui Chen & Mohsin S. Khan, 1997. "Patterns of Capital Flows to Emerging Markets: A Theoretical Perspective," IMF Working Papers 97/13, International Monetary Fund.
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