What Determines the Composition of Banks' Loan Portfolios? Evidence from Transition Countries
45 Pages Posted: 17 Dec 2007 Last revised: 9 Apr 2010
Date Written: August 6, 2009
This paper explores how bank characteristics and the institutional environment influence the composition of banks’ loan portfolios. We use a new and unique data set based on the EBRD Banking Environment and Performance Survey (BEPS), which was conducted for 220 banks in 20 transition countries. We show that bank ownership, bank size, and legal creditor protection are important determinants of the composition of banks’ loan portfolios. In particular, we find that foreign banks play an active role in mortgage lending. Moreover, banks that perceive pledge and mortgage laws to be of high quality choose to focus more on mortgage lending.
Keywords: Foreign banks, SMEs, Legal environment, Portfolio composition
JEL Classification: F36, G21, K22, P27
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