International bank credit, nonbank lenders, and access to external financing

Jose Maria Serena Garralda, Marina‐Eliza Spaliara and Serafeim Tsoukas

Economic Inquiry, 2022, vol. 60, issue 3, 1214-1232

Abstract: Using a cross‐country firm‐bank dataset, we examine how an unexpected increase in bank capital requirements by the European Banking Authority affects firms' financial choices. We find that the regulatory shock implies a reduction in the supply of bank credit, with US firms affected the most. Yet, US firms can tap into the public bond markets and secure credit lines from nonbank financial institutions. This has implications for their capital structure and their real outcomes. These results suggest that diversified domestic loan markets, in which banks and nonbank financial institutions lend to corporations, can help overcome reductions in cross‐border bank funding.

Date: 2022
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https://doi.org/10.1111/ecin.13078

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Working Paper: International bank credit, nonbank lenders, and access to external financing (2022)
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