Regulatory arbitrage and loan location decisions by multinational banks

Asli Demirguc-Kunt, Balint Horvath and Harry Huizinga

Journal of International Economics, 2023, vol. 145, issue C

Abstract: This paper examines the impact of international differences in capital regulation on multinational banks' loan origination location decisions. International loan location decisions represent a key banking margin that has previously not been examined in the literature on regulatory arbitrage by banks. Our estimation relies on within-loan contribution variation in location options for individual multinational banks that participate in a syndicated loan. We examine how the loan location choice and the intensity of regulatory arbitrage are affected by borrower transparency. We find that greater borrower transparency to a local bank establishment makes loan location at this establishment more likely, and that regulatory arbitrage is more intense in the case of more transparent borrowers.

Keywords: Regulatory arbitrage; Capital regulations; Loan origination (search for similar items in EconPapers)
JEL-codes: G21 G38 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Working Paper: Regulatory Arbitrage and Loan Location Decisions by Multinational Banks (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:145:y:2023:i:c:s0022199623001265

DOI: 10.1016/j.jinteco.2023.103840

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