Lender Heterogeneity and the Maturity of International Loans
International capital markets are populated by heterogeneous investors. Some have better facilities to evaluate foreign borrowers and are more permanent players on the international scene. They are also more likely to invest longer-term. Others are more occasional, smaller-scale investors, and are more prone to shorter-term financing. As a country becomes more attractive for investment, the proportion of capital supplied by the latter type increases. Since those investors supply mostly short-term debt, the average maturity of loans becomes shorter. Therefore, higher levels of investment are associated with shorter maturity. Data on international lending by U.S. banks lend support to that hypothesis.
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