Institute of Information Theory and Automation

Publication details

Lending Behavior of Multinational Bank Affiliates

Journal Article

Derviz Alexis, Podpiera J.


serial: Risk Governance and Control: Financial Markets & Institutions vol.1, 1 (2011), p. 19-36

research: CEZ:AV0Z10750506

keywords: Multinational bank, Contagion, Substitution, Agency

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abstract (eng):

We study the parent influence on lending by affiliates of a multinational bank. In the proposed theoretical model, local lending is influenced by shareholder-affiliate manager delegation and precautionary motives. The outcome is either contagion (the loan volume in the affiliate follows the direction of the parent bank country shock) or performance-based reallocation of funds (substitution), depending on the degree of manager delegation in the affiliate and the liquidity-sensitivity in the parent bank. Empirical investigation, deliberately conducted on a sample not covering the latest financial crisis, shows that also in “normal” times, multinational banks that are likely to delegate lending decisions or be more liquidity-sensitive are more inclined towards contagionist behavior.

RIV: AH

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Last modification: 21.12.2012
Institute of Information Theory and Automation