International Shock Transmission after the Lehman Brothers Collapse: Evidence from Syndicated Lending

After Lehman Brothers filed for bankruptcy in September 2008, cross-border bank lending contracted sharply. To explain the severity and variation in this contraction, we analyze detailed data on cross-border syndicated lending by 75 banks to 59 countries. We find that banks which had to write down s...

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Bibliographic Details
Published in:The American economic review 2012-05, Vol.102 (3), p.231-237
Main Authors: De Haas, Ralph, Van Horen, Neeltje
Format: Article
Language:English
Subjects:
Balance sheets
Bank capital
Bank credit
Bank failures
Bank loans
Bank markets
Banking crises
Bankruptcy
Banks
Business conditions
Collateralized loan obligations
Credit
Cross border transactions
Data analysis
Financial crisis
Financial services
Foreign subsidiaries
Funding
International economics
Loans
Long term debt
Market strategy
Participating loans
Stock prices
THE INTERNATIONAL TRANSMISSION OF FINANCIAL SHOCKS: BANK-LEVEL EVIDENCE FROM THE 2007-2009 CRISIS
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Summary:After Lehman Brothers filed for bankruptcy in September 2008, cross-border bank lending contracted sharply. To explain the severity and variation in this contraction, we analyze detailed data on cross-border syndicated lending by 75 banks to 59 countries. We find that banks which had to write down sub-prime assets, refinance large amounts of long-term debt, and which experienced sharp declines in their market-to-book ratio, transmitted these shocks across borders by curtailing their lending abroad. While shocked banks differentiated between countries in much the same way as less constrained banks, they restricted their lending more to small borrowers. [PUBLICATION ABSTRACT]
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.102.3.231