Internal capital market practices of multinational banks evidence from South Africa

Adeline Pelletier

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper examines how internal capital flows inside multinational banks create global financial interconnections, relying on a novel database on foreign banks operating in South Africa. Using the event of the East Asian crisis, I find that foreign affiliates’ balance sheet face “reversal of fortune” when other members of their banking group need large amounts of internal capital to cushion capital losses, leading to an abrupt reallocation of internal capital across countries. At the same time, an increase of the volume of internal funding received is shown to cause an expansion of credit to the local private sector.

Keywords: internal capital markets; multinational banks; crisis transmission; credit supply (search for similar items in EconPapers)
JEL-codes: E44 G21 G32 (search for similar items in EconPapers)
Date: 2018-05-01
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Citations: View citations in EconPapers (3)

Published in Journal of Banking and Finance, 1, May, 2018, 90, pp. 131-145. ISSN: 0378-4266

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:87528

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