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Published in: Journal of Economics and Finance 4/2022

13-07-2022

On the uncertainty-global bank linkage nexus: The moderation of crises, financial regulations, and institutional quality

Authors: Tien Van Nguyen, Dung Phuong Hoang, Thang Ngoc Doan

Published in: Journal of Economics and Finance | Issue 4/2022

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Abstract

This paper investigates the effects of uncertainty on international bank linkages based on international data from 1990 to 2013. We further provide insights into this relationship by testing the moderating effects of crises, financial regulations, and institutional quality. The amount of bank pairs that connect via international syndicated lending from source to target country is used to measure the global bank linkages whereas the world uncertainty index reflects a country’s uncertainty. We control the unobserved factors by using a full set of fixed effects, including year, source, target-country, and country-pair fixed effects. Moreover, we incorporate the source country-year fixed effect that reflects any international and country-level shocks affecting bank loan supply from a common source country to disentangle the effect of uncertainty shocks in the host country. The empirical results show that the uncertainty in target countries dampens the bank linkages. The effect of uncertainty becomes pronounced when the target countries have crises, stricter financial regulations, or weaker institutions. Our main results are robust when using alternative measures of uncertainty and when controlling for endogeneity problems.
Footnotes
1
Cross-border lending doubled in the period 2001–2014 and has become a substantial pillar of international capital transactions (World Bank, 2017).
 
2
We thank Caballero et al. (2018) for sharing the data.
 
3
The result is available upon request.
 
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Metadata
Title
On the uncertainty-global bank linkage nexus: The moderation of crises, financial regulations, and institutional quality
Authors
Tien Van Nguyen
Dung Phuong Hoang
Thang Ngoc Doan
Publication date
13-07-2022
Publisher
Springer US
Published in
Journal of Economics and Finance / Issue 4/2022
Print ISSN: 1055-0925
Electronic ISSN: 1938-9744
DOI
https://doi.org/10.1007/s12197-022-09593-9

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