 Foreign bank lending during a crisis: The impact of financial regulationsMeng-Fen Hsieh and Chien-Chiang Lee () Economic Systems, 2020, vol. 44, issue 3 Abstract: This study examines foreign bank lending during crises by using data on 1,558 individual banks in Asian and Latin American countries during the period 1987-2013. Our results reveal that, in a crisis period, Asian banks with a higher level of foreign ownership tend to reduce their lending. Nevertheless, during crises banks consistently increase their lending in order to support their borrowers; in fact, in Latin America, crises stimulate foreign banks to lend more. Our evidence on lending during a crisis supports credit rationing theories with a flight to quality. The international substitution effect also holds based on our results. Taking financial structures and regulation into consideration, for banks with more foreign ownership in a highly concentrated financial system in Asia, the crisis has less effect on a cut in lending, while it has a greater effect on cuts in lending for countries with a higher level of government-owned assets. This paper contributes to the existing literature on the bank lending channel and provides implications for policymakers. Keywords: Foreign bank; Lending; Regulations; Banking crises; Asia and Latin America (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:44:y:2020:i:3:s0939362518303996 DOI: 10.1016/j.ecosys.2020.100791 Access Statistics for this article Economic Systems is currently edited by R. Frensch More articles in Economic Systems from Elsevier Contact information at EDIRC. |
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