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Foreign Bank Behavior during Financial Crises
Author(s) -
ADAMSKANE JONATHON,
CABALLERO JULIÁN A.,
LIM JAMUS JEROME
Publication year - 2017
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12382
Subject(s) - exploit , financial system , financial crisis , business , monetary economics , foreign ownership , economics , foreign direct investment , macroeconomics , computer security , computer science
This paper studies whether lending by foreign banks is affected by financial crises. We pair a bank‐level data set of foreign ownership with information on banking crises and examine whether the credit supply of majority foreign‐owned banks that underwent home‐country crises differ systematically from those of other foreign banks. In contrast to the literature, our broad global coverage allows us to exploit variations between foreign banks; this enables us to identify an average treatment effect directly attributable to crises. Our baseline results show that banks exposed to home‐country crises between 2007–08 exhibit changes in lending patterns that are lower by between 13% and 42% than their noncrisis counterparts. This finding is robust to potential alternative explanations, and also holds, though less strongly, for the 1997/98 Asian crisis.