Integrating with their Feet: Cross-Border Lending at the German-Austrian Border

Jarko Fidrmuc and Christa Hainz

No 2279, CESifo Working Paper Series from CESifo

Abstract: The financial integration in Europe concentrates on cross-border mergers rather than cross-border lending and emphasizes the need for harmonizing bank regulation and supervision. We study the impact of cross-border lending in a theoretical model where banks acquire either hard or soft information of borrowing firms. We test the model’s predictions using the ifo business climate survey that reports the perceptions of German firms’ credit availability between 2003 and 2006. Our results show that distance matters for cross-border lending, especially for the SMEs. In contrast to the policy of harmonization, differences in bank regulations may have speeded up the cross-border lending.

Keywords: financial integration; SMEs; banking supervision; business surveys; threshold analysis (search for similar items in EconPapers)
JEL-codes: C25 G18 G21 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Working Paper: Integrating with Their Feet: Cross-Border Lending at the German-Austrian Border (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_2279

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