| By: |
Emanuela Benincasa (Swiss Finance Institute; University of Zurich - Department of Banking and Finance);
Gazi Kabas (University of Zurich);
Steven Ongena (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)) |
| Abstract: |
We document that lenders react to domestic climate policy stringency by
increasing cross-border lending. We use granular fixed effects to control for
loan demand and an instrumental variable strategy to establish causality.
Consistent with regulatory arbitrage, the positive effect decreases in
borrowers’ climate policy stringency and is absent if the borrower country has
a higher stringency. Furthermore, climate policy stringency decreases loan
supply to domestic borrowers with high carbon risk while increasing loan
supply if such borrowers are abroad. Our results suggest that crossborder
lending can enable lenders to exploit the lack of global coordination in
climate policies. |
| Keywords: |
Cross-Border Lending, Climate Policy, Regulatory Arbitrage, Syndicated Loans |
| JEL: |
G21 H73 Q58 |
| Date: |
2022–04 |
| URL: |
http://d.repec.org/n?u=RePEc:chf:rpseri:rp2228&r= |