Whilst the connection between culture and financial intermediation across countries has received considerable
attention, there is scant work on the role of local ethnicity in bank lending operations. To fill this void, we lean
on the sociology literature to scrutinize the impact of local ethnicity characteristics on syndicated loan
composition and size in cross-border lending. We specifically examine whether local demographics in the U.S.
for a specific bank impact their contracting in the international syndicated loan market. Exploiting Gravity
Models, we find a higher likelihood of syndication and volume in cross-border loans when there is overlap in
local and foreign market ethnicity. To alleviate endogeneity concerns between ethnicity and bank lending, we
conduct robustness tests on different sub-samples. This analysis reports a significant uptick in cross-border
loans for merging banks which share ethnicity in their neighbourhood (or zip). Moreover, these loans are
associated with lower spreads than other matched cross-border loans, which can be explained by lower
asymmetric information.