Transmission of a global financial crisis shock to an emerging economy

Rehman, Asim, Chaudhry, Sajid M. and Hussain, Syed Mujahid (2018). Transmission of a global financial crisis shock to an emerging economy. International Journal of Finance and Economics ,

Abstract

Using a unique dataset consisting of all corporate loans in Pakistan, we study the impact of the global financial crisis (GFC) on the lending ability of its banking sector. We also take into account various bank and loan types along with extensive margins, firm size effects, and impact of information asymmetry. Our findings show that the Pakistani banking sector was indeed affected by the GFC as high exposure banks, who borrow relatively more internationally, reduce lending to local firms and this impact is larger for small firms. We also find differences in the lending ability of various bank types and loan types. By using direct information asymmetry measure, we find that banks reduced lending after the global financial crisis shock. However, the information gathered from the previous relationship of the borrower with relatively low exposure banks can overcome the negative financial shock and increase lending after the shock. These findings are very relevant in the context of the spillover effects of the GFC and have important policy implications for emerging markets.

Publication DOI: https://doi.org/10.1002/ijfe.1689
Divisions: Aston Business School
Additional Information: This is the peer reviewed version of the following article: ehman A, Chaudhry SM, Hussain SM. Transmission of a global financial crisis shock to an emerging economy. Int J Fin Econ. 2018;1–21, which has been published in final form at https://doi.org/10.1002/ijfe.1689.  This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.
Uncontrolled Keywords: banks,financial contagion,financial crisis,information asymmetry,Accounting,Finance,Economics and Econometrics
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Related URLs: http://www.scop ... tnerID=8YFLogxK (Scopus URL)
https://onlinel ... .1002/ijfe.1689 (Publisher URL)
Published Online Date: 2018-10-18
Authors: Rehman, Asim
Chaudhry, Sajid M. ( 0000-0001-8769-8920)
Hussain, Syed Mujahid

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