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ZEPPELIN Chair of International Economics

Research Projects

The Effect of Banking Regulation on Cross-Border Lending

Project Description

Regulation may oblige banks to document their evaluation of firms’ creditworthiness for a supervisory authority. Consequently, banks cannot use private information but need to collect verifiable information. Thus, bank regulation influences the choice of the lending technology. We show in a theoretical model that differences in regulation increase competition between domestic and foreign banks. Strict domestic regulation results in cross-border lending by competing foreign banks. We predict that lending rates are lower and access to credit is easier for firms located closer to the border. These predictions are confirmed in the empirical analysis using unique bank- and firm-level data from Germany

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Project Duration

from 01.05.2011 through 31.12.2013

Project Head

Prof. Dr. Jarko Fidrmuc

Project Execution



Financing

eigenfinanziertes Forschungsprojekt

Project-related Publications

  • Fidrmuc, Jarko / Hainz, Christa: Financial Integration and Banking Regulation: Cross-Border Lending in Germany, Journal of Banking and Finance, 2013, Jg. 37 (5): 1310 - 1322


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