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Better the Devil you Know: Home and Sectoral Biases in Bank Lending

Aurore Burietz () and Loredana Ureche-Rangau ()
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Loredana Ureche-Rangau: Faculty of Economics and Business, Université de Picardie Jules Vernes, CRIISEA

No 2020-ACF-02, Working Papers from IESEG School of Management

Abstract: This paper empirically investigates bank lending decisions and the extent to which they are influenced by specific preferences in terms of geographical location and industry. We study whether banks develop a field of expertise and focus on it, or whether they prefer to diversify during both normal and crisis times. We manually built an original database of syndicated loans for banks in the four major banking systems in the eurozone, to estimate the determinants of loans’ amounts between 2005 and 2013. We show that bank lending is influenced by both the geographical location and the industry of the borrower. Our findings highlight a domestic bias and a sectoral bias with banks lending more to their domestic borrowers and to industries they are specialized in.

Keywords: Credit supply; home bias; sectoral bias; syndicated loan market; financial crisis (search for similar items in EconPapers)
JEL-codes: F34 G01 G21 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2020-05
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Journal Article: Better the devil you know: Home and sectoral biases in bank lending (2020) Downloads
Working Paper: Better the devil you know: Home and sectoral biases in bank lending (2020) Downloads
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