Publication: Regulatory Arbitrage and Cross-Border Syndicated Loans
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2019-10
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2019-10-10
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This paper investigates how international regulatory and institutional differences affect lending in the cross-border syndicated loan market. Lending provided through a foreign subsidiary is subject to subsidiary-country regulation and institutional arrangements. Multinational banks' choices between loan origination through the parent bank or through a foreign subsidiary provide information about these banks' preferences to operate in countries with varying regulations and institutions. The results indicate that international banks have a tendency to switch loan origination toward countries with less stringent bank regulation and supervision consistent with regulatory arbitrage, but that they prefer to originate loans in countries with higher-quality institutions related to financial market monitoring, creditor rights, and the speed of contract enforcement.
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“Horvath, Balint L.; Demirguc-Kunt, Asli; Huizinga, Harry. 2019. Regulatory Arbitrage and Cross-Border Syndicated Loans. Policy Research Working Paper;No. 9037. © World Bank. http://hdl.handle.net/10986/32521 License: CC BY 3.0 IGO.”
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