 Transmission of liquidity shocks: Evidence on cross-border bank ownership linkagesYifei Cao, Ian Gregory-Smith () and Alberto Montagnoli () Journal of International Financial Markets, Institutions and Money, 2018, vol. 53, issue C, 158-178 Abstract: This study examines whether a liquidity shock to a banking system could be transmitted to other economies through a network of bank ownership. Firstly we construct cross-border ownership networks for banks located in European countries. We then exploit the 2010 European debt crisis as a natural experiment. The analysis shows that subsidiary banks located outside of Greece, Ireland, Italy, Portugal and Spain (GIIPS) but with ownership linkages to these countries have a lower loan growth rate during the crisis period. This suggests that the liquidity shock experienced by GIIPS countries was indeed transmitted to those banks through ownership linkages. Larger subsidiary banks and those subsidiaries that were more profitable are found to be more resilient to the shock. We also find that the parent bank’s characteristics affect the transmission of the shock, supporting the notion of an internal capital market operating within these banks. Keywords: Foreign banks; Liquidity crisis; Crisis transmission; Bank lending (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:intfin:v:53:y:2018:i:c:p:158-178 DOI: 10.1016/j.intfin.2017.09.017 Access Statistics for this article Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely More articles in Journal of International Financial Markets, Institutions and Money from Elsevier |
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