Institute of Information Theory and Automation

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Publication details

Parent Influence on Loan Pricing by Czech Banks

Journal Article

Derviz Alexis, Raková M.

serial: Prague Economic Papers vol.21, 4 (2012), p. 434-449

keywords: multinational bank, interest rate, internal capital market

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abstract (eng):

We investigate the influence which the financial condition of a multinational bank group may have on the lending rates of its affiliates, using data from the ten biggest banks in the Czech Republic under foreign control. The analysis is based on a theory of bank lending in which the implicit opportunity costs of lending by a foreign bank affiliate are influenced by the scarcity of funds within the multinational conglomerate. The theory predicts that parent banks’ influence should be stronger in loan segments with more pronounced information asymmetry. Our empirical model, which explains the interest rate charged by the affiliate by means of affiliate-level controls and a parent influence variable, is tested for three categories of commercial non-financial borrowers (domestically owned firms, foreign-owned firms and the self-employed).


bocek: 2012-12-21 16:10