Specialization in Bank Lending: Evidence from Exporting Firms

Daniel Paravisini, Veronica Rappoport, Philipp Schnabl

NBER Working Paper No. 21800
Issued in December 2015
 

This paper develops an empirical approach for identifying bank specialization in export markets. Combining loan and shipment data for all exporters in Peru, we find that all banks have abnormally large and persistent loan portfolio exposures to at least one export destination market. Specifications that saturate all bank-time and firm-time variation show that firms that expand exports to a country are more likely to borrow from banks that specialize in that country. This link between exports and bank specialization holds both for existing and new lending relationships. Using differential exposure to the 2008 financial crisis, we further find that shocks to the credit supply of banks has a larger effect on exports to the bank's markets of specialization, implying that specialized bank debt is difficult to replace. These results suggest that banks have market-specific areas of expertise that are distinct from firm-specific knowledge gathered through relationship lending.