Journal
RESEARCH IN INTERNATIONAL BUSINESS AND FINANCE
Volume 60, Issue -, Pages -Publisher
ELSEVIER
DOI: 10.1016/j.ribaf.2022.101626
Keywords
Onshore guarantees for offshore loans; Banks; Risk-taking; State-owned banks; Financial holding companies; Board size
Categories
Funding
- Ministry of Science and Technology of Taiwan [MOST 104-2410-H-025-007-, MOST 108-2918-I-025-001-]
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This research systematically reviews the literature on off-balance-sheet activities and cross-border interbank transactions, and discusses the relationship between onshore guarantees for offshore loans and bank risk-taking. The empirical analysis shows that banks with higher risk-taking have higher amounts of guarantees, especially in private banks and independent banks.
This research explores the issue of onshore guarantees for offshore loans, which are significant off-balance-sheet activities that have seldom been examined. Our research systematically reviews the literature on off-balance-sheet activities and cross-border interbank transactions and also discusses popular shadow-banking activities in recent times. Because of the high-risk characteristics of off-balance-sheet activities, our empirical work focuses on the relationship of onshore guarantees with offshore loans and bank risk-taking. We employ data of all Taiwanese banks doing the business of onshore guarantees for offshore loans in China during 2013-2017 and provide evidence that banks with more risk-taking have higher amounts of such guarantees. Furthermore, by sub-sample regression we find this phenomenon strongly exists in private banks and independent banks, indicating they are more sensitive to higher risk characteristics of the offbalance-sheet loans.
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