Onshore guarantees for offshore loans and bank risk-taking: Evidences from Taiwanese banks

Ting-Hsuan Chen, Chia-Wu Lu and Meng-Fen Hsieh

Research in International Business and Finance, 2022, vol. 60, issue C

Abstract: This research explores the issue of onshore guarantees for offshore loans, which are significant off-balance-sheet activities that have seldom been examined. Our research systematically reviews the literature on off-balance-sheet activities and cross-border interbank transactions and also discusses popular shadow-banking activities in recent times. Because of the high-risk characteristics of off-balance-sheet activities, our empirical work focuses on the relationship of onshore guarantees with offshore loans and bank risk-taking. We employ data of all Taiwanese banks doing the business of onshore guarantees for offshore loans in China during 2013–2017 and provide evidence that banks with more risk-taking have higher amounts of such guarantees. Furthermore, by sub-sample regression we find this phenomenon strongly exists in private banks and independent banks, indicating they are more sensitive to higher risk characteristics of the off-balance-sheet loans.

Keywords: Onshore guarantees for offshore loans; Banks; Risk-taking; State-owned banks; Financial holding companies; Board size (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:60:y:2022:i:c:s0275531922000149

DOI: 10.1016/j.ribaf.2022.101626

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