Regulatory Arbitrage and Cross-Border Syndicated Loans

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.

Bibliographic Details

Main Authors:	Horvath, Balint L., Demirguc-Kunt, Asli, Huizinga, Harry
Format:	Working Paper biblioteca
Language:	English
Published:	World Bank, Washington, DC 2019-10
Subjects:	REGULATION, CREDITOR RIGHTS, SYNDICATED LOANS, INTERNATIONAL LENDING, MULTINATIONAL BANK,
Online Access:	http://documents.worldbank.org/curated/en/856421570624402799/Regulatory-Arbitrage-and-Cross-Border-Syndicated-Loans https://hdl.handle.net/10986/32521
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