Cross-Border Financing by the Industrial Sector Increases Competition in the Domestic Banking Sector
Name
Cross-border financing.pdf
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554.35 KB
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e80ec097f8bbdddeb5173fca9c27f05b
Author(s)
Jayaraman, Sudarshan
Kothari, S. P.
Date Issued
July 2015
Journal
The Accounting Review
Publisher
American Accounting Association
Citation
Jayaraman, Sudarshan and Kothari, S. P. “Cross-Border Financing by the Industrial Sector Increases Competition in the Domestic Banking Sector.” The Accounting Review 91, no. 2 (March 2016): 535–558. © 2015 American Accounting Association
Version
Author's final manuscript
Abstract
We predict that access to cross-border financing by the industrial sector reduces firms' reliance on domestic banks, thereby leading to lower rents for banks and greater competition in the domestic banking sector. We also predict that banks take on more risk to offset these lost rents and remain competitive. Using mandatory adoption of International Financial Reporting Standards (IFRS) to identify variation in cross-border financing, we find evidence consistent with our hypotheses. Additional tests verify that the effects emanate from the demand side (i.e., firms not relying on banks) rather than the supply side (i.e., banks not willing to lend to firms). Overall, we document how competition from overseas financial markets influences the domestic banking sector.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.2308/accr-51199
