Why Do Firms Borrow from Foreign Banks?

Umit Yilmaz
Additional contact information
Umit Yilmaz: Swiss Finance Institute at the University of Lugano

No 20-47, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: I examine U.S. firms' motives for participating in cross-border syndicated loans with foreign banks. Firms borrowing from foreign lead arrangers pay higher interest rates on their loans compared to firms borrowing from local banks, controlling for firm and loan characteristics and using matched sample analyses. These firms experience an increase in foreign income and international M&A activity after the loan, which suggests that global expansion of operations is an important reason why a firm borrows beyond borders. I also find that loan spreads increase with the geographic and cultural distance between borrowers and foreign lenders, consistent with higher information acquisition and monitoring costs.

Keywords: Cross-border borrowing; Foreign banks; Syndicated loans; Loan pricing (search for similar items in EconPapers)
JEL-codes: F34 F36 G15 G21 G30 (search for similar items in EconPapers)
Pages: 68 pages
Date: 2020-06
New Economics Papers: this item is included in nep-ban
References: Add references at CitEc
Citations:

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3380086 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2047

Access Statistics for this paper

More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal (rps@sfi.ch).