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The effect of banking regulation on cross-border lending

Jarko Fidrmuc () and Christa Hainz

Journal of Banking & Finance, 2013, vol. 37, issue 5, 1310-1322

Abstract: Banking regulations often differ between countries: Some regulators require banks to document their evaluation of firms’ creditworthiness, which determines the banks’ choice of lending technology. In a theoretical model, we study how differences in regulation influence competition between domestic and foreign banks and analyze the effect of regulatory harmonization on cross-border lending. We predict that lending rates are lower and access to credit is easier for firms in a border region if the national regulations differ. Using unique bank- and firm-level data from Germany, we show that firms in a border region have better access to credit if regulation differs.

Keywords: Bank regulations; Cross-border lending; SMEs; Difference-in-difference estimation (search for similar items in EconPapers)
JEL-codes: G21 G18 F23 (search for similar items in EconPapers)
Date: 2013
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Working Paper: The Effect of Banking Regulation on Cross-Border Lending (2012) Downloads
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Handle: RePEc:eee:jbfina:v:37:y:2013:i:5:p:1310-1322