CroSS-Border Lending Contagion in MuLtinationaL BankS

We study both theoretically and empirically the interdependence of lending decisions in differentcountry branches of a multinational bank. First, we model a bank that delegates the management of itsforeign unit to a local manager with non-transferable skills. The bank differs from other internationalinvestors due to a liquidity threshold which induces a depositor run and a regulatory action if attained...

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Year of publication:	2007-09-01
Authors:	Derviz, Alexis ; Podpiera, Jiří
Institutions:	European Central Bank

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Abstract
Non-technical summary
1 Introduction
2 Literature review
3 A model of multinational bank withdelegated foreign branch management
3.1 Bank balance sheet and cash f lows
3.2 Shareholder preferences
3.3 Shareholder-manager interaction
3.4 Optimal lending
3.5 Discussion
4 Empirical evidence on cross-borderlending contagion
4.1 Data description
4.2 Estimation results
5 Conclusion
References
Appendix: Proof of proposition 2

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