Local versus foreign banks: A home market advantage in loan syndications

Tram Vu, Viet Do and Michael Skully

International Review of Financial Analysis, 2015, vol. 37, issue C, 29-39

Abstract: This paper investigates the contract terms of local versus foreign bank lead loan syndications to test two opposing theories: the home market advantage gained by closer geographical proximity and soft information from existing banking relationships, versus the hold-up problem where banks exploit their information advantage at the borrower's expense. The home market advantage was supported with domestic banks informationally superior to their foreign counterparts. Loans arranged by the former carry lower interest rates, have longer maturities, and are less likely to require collateral. These results are robust after controlling for the non-randomness of the lender–borrower matching process.

Keywords: Loan syndication; Home market advantage; Foreign banks; Asymmetric information (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:37:y:2015:i:c:p:29-39

DOI: 10.1016/j.irfa.2014.11.002

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