'Lending by Example': Direct and Indirect Effects of Foreign Banks in Emerging Markets

'Lending by Example': Direct and Indirect Effects of Foreign Banks in Emerging Markets

Mariassunta Giannetti, Steven Ongena

Series number :

Serial Number: 
221/2008

Date posted :

October 01 2005

Last revised :

October 30 2018
SSRN Share

Keywords

  • Foreign bank lending • 
  • Emerging markets • 
  • competition • 
  • lending relationships.

Using a novel dataset that allows us to trace the bank relationships of a sample of mostly unlisted firms, we explore which borrowers are able to benefit from foreign bank presence in emerging markets. Our results suggest that the limits to financial integration are less tight than the static picture of firm-bank relationships implies.

Even though foreign banks are more likely to engage large and foreign-owned firms, after an acquisition, a bank is 20 percent less likely to terminate a relationship with a firm if the acquirer is foreign rather than domestic. Most importantly, within a credit market, firms appear to have the same access to financial loans and ability to invest whether they borrow from a foreign bank or not, while foreign banks benefit all firms by indirectly enhancing credit access.

 

Authors

Real name: 
Steven Ongena