Violent conflict and cross-border lending

Ralph de Haas, Mikhail Mamonov, Alexander Popov and Iliriana Shala

No 2/2026, BOFIT Discussion Papers from Bank of Finland Institute for Emerging Economies (BOFIT)

Abstract: How do violent conflicts shape cross-border lending? Using syndicated loan data on 14,021 creditors and 97,169 firms across 179 countries, we document a dual response. Relative to domestic creditors, foreign lenders reduce overall lending by 27% (supplydriven) but increase lending to military-related sectors by 24% (demand-driven). This reallocation is concentrated among lenders with military-sector expertise but limited country specialization, and flows toward politically non-aligned conflict zones. Preconflict exposure to cross-border lenders is associated with divergent firm-level outcomes: military firms expand assets, revenues, and employment, while exposed civilian firms contract. Violent conflicts thus selectively redirect, rather than uniformly suppress, cross-border credit.

Keywords: Cross-border lending; syndicated loans; violent conflict; military lending; geopolitical fragmentation; credit reallocation (search for similar items in EconPapers)
JEL-codes: D74 F34 F51 G15 G21 H56 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofitp:342402

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