When the cat’s away the mice will play"

Does regulation at home affect bank risk-taking abroad?

S. Ongena, A. Popov, G.F. Udell

Research output: Contribution to journalArticleScientificpeer-review

Abstract

This paper provides the first empirical evidence that bank regulation is associated with cross-border spillover effects through the lending activities of large multinational banks. We analyze business lending by 155 banks to 9,613 firms in 1,976 different localities across 16 countries. We find that lower barriers to entry, tighter restrictions on bank activities, and to a lesser degree higher minimum capital requirements in domestic markets are associated with lower bank lending standards abroad. The effects are stronger when banks are less efficiently supervised at home, and are observed to exist independently from the impact of host-country regulation.
Original languageEnglish
Pages (from-to)727-750
JournalJournal of Financial Economics
Volume108
Issue number3
Publication statusPublished - 2013

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Mouse
Bank risk taking
Lending
Bank lending
Cross-border
Capital requirements
Locality
Barriers to entry
Empirical evidence
Bank regulation
Spillover effects
Domestic market
Host country
Multinational banks

Cite this

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title = "When the cat’s away the mice will play{"}: Does regulation at home affect bank risk-taking abroad?",
abstract = "This paper provides the first empirical evidence that bank regulation is associated with cross-border spillover effects through the lending activities of large multinational banks. We analyze business lending by 155 banks to 9,613 firms in 1,976 different localities across 16 countries. We find that lower barriers to entry, tighter restrictions on bank activities, and to a lesser degree higher minimum capital requirements in domestic markets are associated with lower bank lending standards abroad. The effects are stronger when banks are less efficiently supervised at home, and are observed to exist independently from the impact of host-country regulation.",
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When the cat’s away the mice will play" : Does regulation at home affect bank risk-taking abroad? / Ongena, S.; Popov, A.; Udell, G.F.

In: Journal of Financial Economics, Vol. 108, No. 3, 2013, p. 727-750.

Research output: Contribution to journalArticleScientificpeer-review

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AU - Popov, A.

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AB - This paper provides the first empirical evidence that bank regulation is associated with cross-border spillover effects through the lending activities of large multinational banks. We analyze business lending by 155 banks to 9,613 firms in 1,976 different localities across 16 countries. We find that lower barriers to entry, tighter restrictions on bank activities, and to a lesser degree higher minimum capital requirements in domestic markets are associated with lower bank lending standards abroad. The effects are stronger when banks are less efficiently supervised at home, and are observed to exist independently from the impact of host-country regulation.

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JO - Journal of Financial Economics

JF - Journal of Financial Economics

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