Borrowing Beyond Borders : Foreign Assets, Lender Choice, and Loan Pricing in the Syndicated Bank Loan Market

This paper examines the ability of firms to overcome cross-country borrowing barriers through foreign asset connections. We find that firm-level foreign assets are an important mechanism in reducing the boundary between borrowers and lenders and thereby enhancing capital access in the syndicated loan market. Our results suggest that firms with foreign assets are more likely to select a foreign lead lender and that the corresponding loans have better pricing terms. We also find that the institutional and regulatory environment heavily influences the choice of lender, and that borrowers are more likely to partner with bankers with whom they share common cultural and language ties. These results lend support to the hypothesis that foreign presence helps reduce information barriers that may arise across borders