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The role of lender country factors in cross border bank lending

Barrell, Ray and Nahhas, Abdulkader (2019) The role of lender country factors in cross border bank lending. International Review of Financial Analysis. ISSN 1057-5219

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Identification Number: 10.1016/j.irfa.2019.01.008

Abstract

This article considers the cross-border lending stock from 19 advanced countries to European countries using quarterly data for 1999–2016. An extended model based on home and host country characteristics conditioned on distance and mass primarily measured by GDP is used to explain the behaviour of cross-border lending stocks. We focus particularly on the competitive structure of domestic banking markets and on the role of EU integration using indicators from the New Industrial Economics literature. Our results suggest EU integration has had a large effect on cross-border lending, although this has been partly reversed after Euro debt crisis. This reversal probably arises more from the actions of home country bank regulators rather than from the rise in risk premia in host countries. We show that in general lender rather than borrower factors are more important, and that more concentrated or less competitive lender countries do more cross border lending, especially in less concentrated or more competitive borrowers. Our results are robust across a range of specifications.

Item Type: Article
Additional Information: © 2019 Elsevier Inc.
Divisions: Centre for Macroeconomics
Subjects: H Social Sciences > HG Finance
JEL classification: F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment; Long-Term Capital Movements
F - International Economics > F1 - Trade > F14 - Country and Industry Studies of Trade
C - Mathematical and Quantitative Methods > C2 - Econometric Methods: Single Equation Models; Single Variables > C23 - Models with Panel Data
Date Deposited: 28 Mar 2019 00:13
Last Modified: 25 Jun 2019 23:08
URI: http://eprints.lse.ac.uk/id/eprint/100332

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