The mix of international banks’ foreign claims: Determinants and implications

Herrero, Alicia García; Pería, María Soledad Martínez

doi:10.1016/j.jbankfin.2006.11.002

Cited by 80 publications

(33 citation statements)

References 28 publications

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“…This result is in line with findings provided by previous empirical studies (e.g. Papaioannou, 2009;Buch, 2005;Herrero and Pería, 2007;Stulz and Williamson, 2003) proposing that linguistic ties may diminish informational frictions for two reasons. First, the existence of a common language may reduce uncertainty and costs of communication during credit negotiations.…”

Section: Gravity Measuressupporting

confidence: 93%

“…More recently, Herrero and Pería (2007) study a mixture of Italian, Spanish and US foreign bank claims on more than 100 recipient countries worldwide for the period from 1997 to 2002. They provide evidence that regulatory barriers to banking as well as restricted business opportunities in borrowing countries may have a significant negative impact on the share of a lending bank's local claims in favor of cross-border claims.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Next to market structure characteristics we additionally control for the regulatory framework implemented in different OECD countries by building two indices from combined data retrieved from three World Bank Surveys on Bank Regulation and Supervision conducted in 1998, 2003and 2007(Barth et al, 2008. The construction of each index is explained in detail in Table 2.…”

Section: Characteristics Of Oecd Banking Marketsmentioning

confidence: 99%

See 2 more Smart Citations

Cross-border bank lending: Empirical evidence on new determinants from OECD banking markets

Müller

Uhde

2013

Journal of International Financial Markets, Institutions and Mo

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Section: Gravity Measuressupporting

confidence: 93%

Section: Literature Reviewmentioning

confidence: 99%

Section: Characteristics Of Oecd Banking Marketsmentioning

confidence: 99%

See 1 more Smart Citation

Cross-border bank lending: Empirical evidence on new determinants from OECD banking markets

Müller

Uhde

2013

Journal of International Financial Markets, Institutions and Mo

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“…19 The average share of local claims held by U.S. banks alone was over 60 percent, and as high as 70-80 percent in individual economies such as Hong Kong SAR, Singapore, Thailand, Malaysia and Taiwan P.O.C. (Herrero and Martinez-Peria, 2007).…”

Section: Full Sample Resultsmentioning

confidence: 99%

Determinants of International Bank Lending from the Developed World to East Asia

Siregar¹,

Choy²

2009

IMF Staff Pap

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Abstract:The reversal of capital flows from the banking sector, rather than portfolio equity investment, has long been considered a main reason for the severity of the East Asian financial crisis of the late 1990s. This study analyzes the factors behind the boom and bust of bank lending, focusing on loans from private banks in seven OECD countries to nine East Asian economies during the 1990-2004 period. Our findings suggest that political instability and weaknesses in the legal, judicial, and bureaucratic systems help explain the continued stagnation in lending after the financial crisis. Thus, institutional reforms are critical for East Asia to successfully compete for international bank financing. JEL Classification Numbers: C23, F11, F34, G21, O53Keywords: Foreign Bank Loans; East Asia; Gravity Model; Trade Intensity; Financial Risk; Law and Order; Bureaucratic Quality 2 For most developing economies in East Asia, foreign borrowing from the developed world has provided much-needed capital to finance rapid economic growth, especially during the 1980s and 1990s. 1 Not surprisingly, the sudden reversal of capital flows from the banking sector was a main reason for the severity of the East Asian financial crisis of the late 1990s.Accompanying the collapse of economic growth in major East Asian countries was a sharp decline in loans from OECD-based commercial banks, in particular loans from Japanese institutions. The hardest hit economies, namely, Indonesia, Malaysia, the Philippines, Thailand, and South Korea, which had experienced net private inflows averaging around US$160 billion per annum in 1995 and 1996 (of which about half were short-term commercial bank loans), saw total foreign liabilities drop by around 45 percent in 1998, as international banks were unwilling to roll over existing loans. This paper attempts to examine some of the factors that contributed to the boom and bust in bank lending to East Asian countries between 1990 and 2004. Little work has been done on the determinants of international bank lending to these countries during the pre-and post-1997 financial crisis periods. 2 Instead, research so far has focused on the cross-border 1 The causal effect of the banking sector's liquidity on economic growth has been well studied (Levine, 2005). 2 A few papers such as Jeanneau and Micu (2002), Kawai and Liu (2002), Rose and Spiegel (2004), Papaioannou (2004), and Aviat and Courdacier (2007) looked at international bank lending to emerging market economies as a whole (grouping emerging markets in East Asia with those in Latin America and Africa). (e) Did the quality of the bureaucracy in the borrowing country matter?The paper proceeds as follows. Section I presents a literature survey and highlights various stylized facts about the pattern of international bank lending to East Asia. Section II considers different specifications of a gravity model for asset flows. Section III describes the data and estimation methods. Section IV presents the key empirical findings for the whole sample of OECD an...

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“…Papaioannou (2005 also uses geographical distance to proxy the transaction and information costs, and find it is inversely associated with the cross-border bank flows. Herrero and Martinez Peria (2007) find that the informational costs significantly affect the share of local claims (to total claims) of foreign banks. Carey and Nini (2007) find that banks display home bias by providing more syndicated loans to their domestic borrowers than to foreign ones.…”

Section: Literature Review: Distance In Multinational Bankingmentioning

confidence: 91%

Does distance affect the performance of foreign banks? Evidence from multinational banking in developing countries

Wu¹,

Jeon²,

Luca³

2010

International Banking in the New Era: Post-Crisis Challenges and Opportunities

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This paper examines whether the geographic distance between subsidiaries of multinational banks and their headquarters is an important factor in determining the performance of the subsidiaries. Using various performance indicators of 340 subsidiaries in 54 emerging and developing economies from 69 global banks during the years 1994-2008, we find evidence that first, the distance constraint adversely affects loan growth, profitability and performance of foreign bank subsidiaries, and second, the unfavorable information asymmetry faced by foreign banks, due to the distance constraint, in financing foreign clients cannot be fully overcome by establishing their presence abroad such as setting up their foreign subsidiaries. We further examine if the effect of distance is symmetric across different banks and countries, and find the following various economic, financial and institutional factors to affect the strength of distance constraints in the multinational banking activities: the entry mode of foreign banks, the history of presence in local markets, the existence of credit information institutions, the cultural similarity between the home and host markets, financial depth, financial crisis periods, the stock market development, the banking market structure in host markets, and the hierarchy of the subsidiary in the multinational banking conglomerate.JEL code: F34, G14, G21

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The mix of international banks’ foreign claims: Determinants and implications

Cited by 80 publications

References 28 publications

Cross-border bank lending: Empirical evidence on new determinants from OECD banking markets

Cross-border bank lending: Empirical evidence on new determinants from OECD banking markets

Determinants of International Bank Lending from the Developed World to East Asia

Does distance affect the performance of foreign banks? Evidence from multinational banking in developing countries

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