Determinants of Bank Long-term Lending Behavior: Evidence from Russia

We investigate the determinants of the banks' propensity to make long-term business loans in an emerging market context. Using a large sample of Russian banks, we find that the median bank allocates only 0.5% of its assets in long-term business loans and that there is wide cross-sectional variation in this ratio among banks. A bank's ability to extend long-term business loans depends on its size, capitalization, and the availability of long-term liabilities rather than its type of ownership. These results highlight the importance of bank-level (supply side) constraints in extending vital long-term credit to firms.