Foreign institutional ownership and cross-border lending

Xi Li and Yun Lou

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study the role of foreign institutional investors in cross-border lending. We find that a borrower’s foreign institutional ownership is positively associated with the likelihood of foreign banks leading a loan syndicate. This relation is stronger among borrowers with more opaque information environment and when foreign institutional shareholders have better access to soft information. We also find that foreign banks are more likely to extend loans to borrowers with foreign institutional shareholders that are headquartered in the same country or members of the same loan associations. These results are consistent with foreign institutional shareholders facilitating cross-border lending by reducing monitoring costs and information frictions faced by foreign lenders.

Keywords: syndicated loans; foreign institutional ownership; cross-border lending; information; monitoring (search for similar items in EconPapers)
JEL-codes: G23 G32 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-fdg and nep-ifn
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