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Contribution Details

Type Working Paper
Scope Discipline-based scholarship
Title Bank loan supply during crises: the importance of geographic diversification
Organization Unit
  • Sebastian Klaus Dörr
  • Philipp Schaz
  • English
Institution University of Zurich
Series Name Working paper series / Department of Economics
Number 288
ISSN 1664-7041
Number of Pages 70
Date 2019
Abstract Text We classify a large sample of banks according to the geographic diversification of their international syndicated loan portfolio. Our results show that diversified banks maintain higher loan supply during banking crises in borrower countries. The positive loan supply effects lead to higher investment and employment growth for firms. Diversified banks are stabilizing due to their ability to raise additional funding during times of distress, which also shields connected markets from spillovers. Further distinguishing banks by nationality reveals a pecking order: diversified domestic banks are the most stable source of funding, while foreign banks with little diversification are the most fickle. Our findings suggest that the decline in financial integration since the recent crisis increases countries’ vulnerability to local shocks.
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Keywords Diversification, global banking, financial stability, syndicated loan market, banking crisis, Diversifikation, Kreditwesen, Wirtschaftliche Stabilität, Finanzkrise
Additional Information Revised version