Foreign%20Bank%20Behavior%20during%20Financial%20Crises

Working Papers

Foreign Bank Behavior during Financial Crises


CODE: IDB-WP-512
AUTHOR(s): Adams-Kane, Jonathon , Caballero, Julian , Lim, Jamus
PUBLISHED: July 2014
LANGUAGE: English
RELATED TOPICS: Finance
DOWNLOAD FILE IN: English

Abstract:

This paper studies whether lending by foreign banks is affected by financial crises. The paper pairs a bank-level dataset of foreign ownership with information on banking crises and examines whether the credit supply of majority foreignowned banks that underwent home-country crises differs systematically from that of other foreign banks. The baseline results show that banks exposed to homecountry crises in 2007 and 2008 exhibit changes in lending patterns that are lower by between 13 and 42 percent than their non-crisis counterparts. This finding is robust to potential alternative explanations and also holds, though less strongly, for the 1997-98 Asian crisis.

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