Bank Relationships, Business Cycles, and Financial Crises

Galina Hale

No 17356, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The importance of information asymmetries in the capital markets is commonly accepted as one of the main reasons for home bias in investment. We posit that effects of such asymmetries may be reduced through relationships between banks established through bank-to-bank lending and provide evidence to support this claim. To analyze dynamics of formation of such relationships during 1980-2009 time period, we construct a global banking network of 7938 banking institutions from 141 countries. We find that recessions and banking crises tend to have negative effects on the formation of new connections and that these effects are not the same for all countries or all banks. We also find that the global financial crisis of 2008-09 had a large negative impact on the formation of new relationships in the global banking network, especially by large banks that have been previously immune to effects of banking crises and recessions.

JEL-codes: F34 F36 (search for similar items in EconPapers)
Date: 2011-08
New Economics Papers: this item is included in nep-ban, nep-cba and nep-fdg
Note: IFM
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Citations: View citations in EconPapers (15)

Published as Hale, Galina, 2012. "Bank relationships, business cycles, and financial crises," Journal of International Economics, Elsevier, vol. 88(2), pages 312-325.
Published as Bank Relationships, Business Cycles, and Financial Crises , Galina Hale. in Global Financial Crisis , Engel, Forbes, and Frankel. 2012

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Journal Article: Bank relationships, business cycles, and financial crises (2012)
Chapter: Bank Relationships, Business Cycles, and Financial Crises (2011)
Working Paper: Bank relationships, business cycles, and financial crisis (2011)
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