Offshore operations and bank loan contracting: Evidence from firms that set up subsidiaries in offshore financial centers |
| |
| Institution: | 1. University of Manitoba, 181 Freedman Crescent, Winnipeg, MB R3T 5V4, Canada;2. University of Waterloo, 200 University Avenue West, Waterloo, ON N2L 3G1, Canada;3. University of Ottawa, 55 Laurier Avenue East, Ottawa, ON K1N 6N5, Canada;4. University of Lethbridge, 4401 University Drive, Lethbridge, AB T1K 3M4, Canada;1. Faculty of Business and Management, Brno University of Technology, Brno, Czech Republic;2. Southampton Business School, University of Southampton, Southampton SO17 1BJ, UK;1. College of Business Administration, University of Illinois at Chicago, 2431 UH MC 168, Chicago, IL 60607, United States;2. Mays Business School, Texas A&M University, 360 Wehner Building MS 4218, College Station, TX 77843, United States;1. Graduate School of Business Administration, Bar-Ilan University, Ramat-Gan 5290002, Israel;2. Faculty of Management, Tel Aviv University, P.O. Box 39040, Ramat Aviv 6997801, Tel-Aviv, Israel;3. School of Business, College of Management Academic Studies, Yitzhak Rabin Blvd., Rishon LeZion 7502501, Israel;1. University of Durham, UK;2. Bangor University, UK;3. Institute of Finance Management, Tanzania;4. Bank Negara Malaysia (Central Bank of Malaysia), Malaysia |
| |
| Abstract: | We examine the effects of a multinational firm's subsidiary operations in offshore financial centers (OFCs) on bank loan contracting terms. Using a propensity score matched cross-country sample of firms with and without OFC subsidiaries, we find that firms with OFC subsidiaries receive less favorable loan terms than firms without OFC subsidiaries. The results from a difference-in-differences analysis and an analysis of a firm's mutation from a non-OFC firm to an OFC firm support the causal effect of offshore operations on the unfavorable loan terms. Furthermore, focusing on firms with OFC subsidiaries, we find that the intensity of offshore operations affects loan terms unfavorably. We also find that the unfavorable effect is more pronounced for more opaque firms and for firms that are headquartered in countries or jurisdictions with weaker legal enforcement. Our findings indicate that banks view offshore operations of borrowers as a credit risk-increasing factor. |
| |
| Keywords: | |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
