Financial Reforms and the Differential Impact of Foreign Versus Domestic Banking Relationships on Firm Value

Hai-Chin Yu, Cheng Few Lee and Ben J. Sopranzetti

Chapter 25 in Handbook of Financial Econometrics, Mathematics, Statistics, and Machine Learning:(In 4 Volumes), 2020, pp 947-978 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This study documents a substantial difference in impact on an emerging market firm’s value due to its use of foreign bank debt relative to domestic bank debt. It finds a positive association between the use of collateral by foreign banks and firm value, however finds no such corresponding association for the use of collateral by domestic banks. The results suggest that as an emerging market’s banking system matures and becomes more sophisticated, the differences between the information contained in local versus foreign bank lending diminishes; this diminishment erodes the differential impact on firm value of foreign versus local bank lending.

Keywords: Financial Econometrics; Financial Mathematics; Financial Statistics; Financial Technology; Machine Learning; Covariance Regression; Cluster Effect; Option Bound; Dynamic Capital Budgeting; Big Data (search for similar items in EconPapers)
JEL-codes: C01 C1 G32 (search for similar items in EconPapers)
Date: 2020
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