Distance Constraints : The Limits of Foreign Lending in Poor Economies  

Oleh:

Mian, Atif

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 61 no. 3 (Jun. 2006), page 1465-1506.
Topik: economy; international banking; bank loans; location analysis; studies; decision making; developing countries; LDCs
Fulltext: p 1465.pdf (352.63KB)

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Perpustakaan Pusat (Semanggi) Nomor Panggil: JJ88 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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How far does mobility of multinational banks solve problems of financial development? Using a panel of 80.000 loans over 7 years, I show that greater cultural and geographical distance between a foreign bank's headquarters and local branches leads it to further avoid lending to "informationally difficult" yet fundamentally sound firms requiring relational contracting. Greater distance also makes them less likely to bilaterally renotiate, and less successful at recovering defaults. Differences in bank size, legal institutions, risk preferences, or unobserved borrower heterogeneity cannot explain these results. These distance constraints can be large enough to permanently exclude certain sectors of the economy from financing by foreign banks.

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