Title

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

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