Journal of Banking & Finance Vol. 176 2025
Renegotiation of international loans, capital regulation, and monetary policy
Abstract
We analyze how changes in capital requirements and policy rate shocks affect international lenders’ decisions to drop out of syndicated loans. Increases in capital requirements in the lender country and decreases in borrower country policy rates imply a greater likelihood that foreign lenders stop supplying capital in international syndicated loans. These results are robust to the inclusion of borrower country, lender country, and loan-round fixed effects. Using lender country capital regulations as instruments, we find evidence of significant economic spillover effects as international lender exits imply smaller loan amounts and shorter maturities. Economic Policy Uncertainty (EPU) and culture variables also help explain lenders’ decisions to exit a syndicate.
- DOI
- 10.1016/j.jbankfin.2025.107443
- Volume
- 176
- Pages
- 107443
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib