We investigate how the lending activities abroad of a multinational bank’s local and hub affiliates have been affected by funding difficulties during the financial crisis. We find that affiliates’ local deposits and performance have been stabilizing loan supply. By contrast, relying on...

We analyze the transmission of bank-specific liquidity shocks triggered by a credit rating downgrade through the lending channel. Using bank-level data for US Bank Holding Companies, we find that a credit rating downgrade is associated with an immediate and persistent decline in access to...

We model the interaction between two economies where banks exhibit both adverse selection and moral hazard and bank regulators try to resolve these problems. We find that liberalizing bank capital flows between economies reduces total welfare by reducing the average size and efficiency of the...

This paper analyses cooperation among national supervisors in the decision to close a multinational bank. The supervisors are asymmetrically informed and exchange information through ’cheap talk’. It is assumed that they consider domestic welfare only. We show that: (1) the supervisors will...

Using a sample from 1993 to 2010 of U.S. corporate bank loans, we study the relationship between CEO incentives for risk-shifting, proxied by Vega, and the cost of corporate bank loans. Equity-based compensation can enhance risk-shifting incentives, encouraging managers to make risky choices to...

The recent crisis highlighted the importance of globally active banks in linking markets. One channel for this linkage is through how these banks manage liquidity across their entire banking organization. We document that funds regularly flow between parent banks and their affiliates in diverse...

Internal capital markets (ICMs) provide firms an alternative to costly external financing; however, they also provide an avenue to avoid the monitoring associated with issuing external capital. We argue that firms operating inefficient internal capital markets will avoid outside financing....

This Paper studies prudential regulation of a multinational bank (MNB here-after). We analyse how two frequently chosen representation forms for MNBs - branch and subsidiary representation - affect the behaviour of national regulators. We find that the different liability structure and insurance...

We identify the difference in market characteristics between different regions as an important determinant of the entry mode choices of foreign banks. The greater the difference in borrower quality between the developed and underdeveloped regions is, the more likely that the foreign bank to...

In a credit market, a low-cost foreign entrant is likely less informed than a domestic bank with information endowments. We present a steady-state model in an infinite-period framework, and analyze how the informational asymmetry affects the lending equilibrium and the foreign banks’ entry...