 Foreign branch and bank lending decisions: Evidence from high-risk borrowersXufeng Wu, Ying-Chen Huang and Chih-Yung Lin Pacific-Basin Finance Journal, 2025, vol. 93, issue C Abstract: This paper investigates whether foreign branches of the top 100 multinational banks transmit superior soft information to their parent banks for cross-border lending decisions. We show that foreign banks with more local branches serve as lead arrangers in syndication loans and earn higher upfront fees. Also, these foreign banks charge higher spreads, offer smaller loans, and require more covenants and collateral. The reason is that these foreign banks often lend to high-risk borrowers because of their superior soft information. As a result, these high-risk borrowers have improved credit quality and profitability after obtaining these loans. Based on the financial crisis of 2007–2009, we adopt a difference-in-differences (DiD) framework to do a robustness check. Consistent with our hypothesis, we find that foreign banks with local branches are more likely to charge higher spreads to high-risk borrowers, especially during the crisis. Keywords: Bank loan contracts; Foreign branch; Soft information; Difference-in-differences; Financial crisis (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:pacfin:v:93:y:2025:i:c:s0927538x25002008 DOI: 10.1016/j.pacfin.2025.102863 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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