Effects of foreign institutional ownership on foreign bank lending : some evidence for emerging markets
Document Type
Journal article
Source Publication
International Review of Finance
Publication Date
6-1-2014
Volume
14
Issue
2
First Page
263
Last Page
293
Abstract
Despite the large literature on developed countries, little is known about the interactions between corporate governance, foreign ownership, and foreign bank lending in developing countries. Using data from five Latin American countries from 2001 to 2008, we provide one of the first pieces of evidence of how foreign ownership affects the loan cost of borrowers in emerging markets. We find that in terms of foreign bank lending, the cost of debt financing is significantly higher for firms whose largest shareholder is a foreign institutional one. The results support the hypothesis that because of potential agency conflicts between shareholders and creditors, having block institutional shareholders tend to increase the borrowers' debt burden. There is further evidence supporting this agency conflict hypothesis as we find that the effects of large institutional shareholders on borrowing costs become larger (smaller) when the conflicts are aggravated (mitigated).
DOI
10.1111/irfi.12021
Print ISSN
1369412X
E-ISSN
14682443
Publisher Statement
Copyright © 2014 International Review of Finance Ltd. 2014
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Jiang, L., & Zhu, Y. (2014). Effects of foreign institutional ownership on foreign bank lending: Some evidence for emerging markets. International Review of Finance, 14(2), 263-293. doi: 10.1111/irfi.12021