The flight home effect

Evidence from the syndicated loan market during financial crises

M. Giannetti, L. Laeven

Research output: Contribution to journalArticleScientificpeer-review

Abstract

This paper shows that the collapse of the global market for syndicated loans during financial crises can in part be explained by a flight home effect whereby lenders rebalance their loan portfolios in favor of domestic borrowers. The home bias of lenders' loan origination increases by approximately 20% if the bank's home country experiences a banking crisis. This flight home effect is distinct from flight to quality because borrowers of different quality are equally affected. The results indicate that the home bias in capital allocation tends to increase when adverse economic shocks reduce the wealth of international investors.
Original languageEnglish
Pages (from-to)23-43
JournalJournal of Financial Economics
Volume104
Issue number1
Publication statusPublished - 2012

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Financial crisis
Home bias
Syndicated loans
Loans
Capital allocation
Investors
Wealth
Banking crisis
Flight to quality
Global market
Loan portfolio
Economic shocks
Home country

Cite this

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The flight home effect : Evidence from the syndicated loan market during financial crises. / Giannetti, M.; Laeven, L.

In: Journal of Financial Economics, Vol. 104, No. 1, 2012, p. 23-43.

Research output: Contribution to journalArticleScientificpeer-review

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