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Integrating with Their Feet: Cross-Border Lending at the German-Austrian Border

  • Fidrmuc, Jarko
  • Hainz, Christa

The current economic policy discussion on financial integration in the European Union concentrates on cross-border mergers. We study the impact of cross-border lending in a theoretical model where banks acquire either hard or soft information on borrowing firms and predict that the closer firms are to the border the more likely banks are to offer them cross-border loans. This hypothesis is confirmed in the ifo Business Climate Survey that reports the perceptions of German firms on banks lending behavior between 2003 and 2006. In contrast to the policy of harmonization, differences in bank regulations may provide incentives for cross-border lending. Thus, we show that financial integration may take place from the bottom up.

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Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 248.

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Date of creation: Aug 2008
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Handle: RePEc:trf:wpaper:248
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  1. Susanne Prantl & Matthias Almus & Jürgen Egeln & Dirk Engel, 2006. "Bank Intermediation and Small Business Lending," CIG Working Papers SP II 2006-21, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  2. Bruce E. Hansen, 1996. "Sample Splitting and Threshold Estimation," Boston College Working Papers in Economics 319., Boston College Department of Economics, revised 12 May 1998.
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  4. Allen N. Berger & Anthony Saunders & Joseph M. Scalise & Gregory F. Udell, 1997. "The effects of bank mergers and acquisitions on small business lending," Proceedings 549, Federal Reserve Bank of Chicago.
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  6. Pietro Alessandrini & Andrea F. Presbitero & Alberto Zazzaro, 2009. "Banks, Distances and Firms' Financing Constraints," Review of Finance, European Finance Association, vol. 13(2), pages 261-307.
  7. Sumit Agarwal & Robert B. H. Hauswald, 2007. "Distance and information asymmetries in lending decisions," Proceedings 1052, Federal Reserve Bank of Chicago.
  8. Robert Hauswald & Robert Marquez, 2006. "Competition and Strategic Information Acquisition in Credit Markets," Review of Financial Studies, Society for Financial Studies, vol. 19(3), pages 967-1000.
  9. Christos Pitelis & Roger Sugden & James R. Wilson, 2006. "Introduction," Chapters, in: Clusters and Globalisation, chapter 1 Edward Elgar.
  10. Scott, Jonathan A & Dunkelberg, William C, 2003. " Bank Mergers and Small Firm Financing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(6), pages 999-1017, December.
  11. Mitchell A. Petersen & Raghuram G. Rajan, 2000. "Does Distance Still Matter? The Information Revolution in Small Business Lending," NBER Working Papers 7685, National Bureau of Economic Research, Inc.
  12. Johannes Jäger & Vanessa Redak, 2006. "Austrian Banks’ Lending and Loan Pricing Strategies against the Background of Basel II," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 12, pages 92-103.
  13. Huang, Rocco, 2007. "Evaluating the real effect of bank branching deregulation: comparing contiguous counties across U.S. state borders," Working Paper Series 0788, European Central Bank.
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  16. M. Ruth & K. Donaghy & P. Kirshen, 2006. "Introduction," Chapters, in: Regional Climate Change and Variability, chapter 1 Edward Elgar.
  17. Anna Alberini & James R. Kahn, 2006. "Introduction," Chapters, in: Handbook on Contingent Valuation, chapter 1 Edward Elgar.
  18. Lieven Baele, 2004. "Measuring European Financial Integration," Oxford Review of Economic Policy, Oxford University Press, vol. 20(4), pages 509-530, Winter.
  19. International Monetary Fund, 2004. "Germany's Three-Pillar Banking System; Cross-Country Perspectives in Europe," IMF Occasional Papers 233, International Monetary Fund.
  20. Paola Sapienza, 2002. "The Effects of Banking Mergers on Loan Contracts," Journal of Finance, American Finance Association, vol. 57(1), pages 329-367, 02.
  21. André Kunkel, 2007. "Freundlicher Kreditmarkt für das verarbeitende Gewerbe," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 60(07), pages 29-31, 04.
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