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Concerted Lending: Did Large Banks Bear the Burden?

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  • Spiegel, Mark M

Abstract

A game-theoretic model of lending with banks heterogeneous by size is introduced in which atomistic small banks free ride on the relending efforts of a large bank. An empirically-testable corollary conclusion suggests that "news" concerning the underlying economic condition of the debtor nation will have a greater impact on the large bank. This empirical prediction is validated for the Latin American Crisis period using evidence from long-term bond spread data. Poolings of cross-sectional time-series data reveal that the equity values of large banks are relatively more sensitive to adverse "news" concerning the quality of Latin American loans. Copyright 1992 by Ohio State University Press.

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  • Spiegel, Mark M, 1992. "Concerted Lending: Did Large Banks Bear the Burden?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(4), pages 465-482, November.
    • Handle: RePEc:mcb:jmoncb:v:24:y:1992:i:4:p:465-82
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    Cited by:

    1. Spiegel, Mark M., 1995. "Threshold effects in international lending," Journal of Development Economics, Elsevier, vol. 46(2), pages 341-356, April.
    2. Woller, Gray M. & Phillips, Kerk, 1995. "LDC default probabilities and U.S. commercial banks: An empirical investigation," International Review of Economics & Finance, Elsevier, vol. 4(4), pages 333-352.
    3. Eaton, Jonathan & Fernandez, Raquel, 1995. "Sovereign debt," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 3, pages 2031-2077, Elsevier.
    4. Sarah Bryant & Spiros Martzoukos, 1998. "The impact of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) on the value of S&L stocks," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 22(2), pages 67-76, June.
    5. Spiegel, Mark M., 2005. "Solvency runs, sunspot runs, and international bailouts," Journal of International Economics, Elsevier, vol. 65(1), pages 203-219, January.
    6. Mark M. Spiegel, 1996. "Fixed-premium deposit insurance and international credit crunches," Economic Review, Federal Reserve Bank of San Francisco, pages 3-15.

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