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 institutiona...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/856421570624402799/Regulatory-Arbitrage-and-Cross-Border-Syndicated-Loans http://hdl.handle.net/10986/32521 |
| Summary: | 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. |
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