Dear all, we kindly invite you to our next Economic Theory & Policy talk on Mon, June 16, 2025, 4:00 PM - TU Wien, Seminarroom: DA green 04 (Freihaus Building, 4th floor, green area) Jochen Guentner (JKU) https://sites.google.com/site/econjochen/ “Multinational firms and bank lending” This paper analyzes the external and internal financing decisions of multinational firms (MNEs) and their role in the transmission of productivity shocks across borders. We extend the costly-state-verification model of Bernanke et al. (1999) to include the internal capital market of an MNE and derive predictions for its optimal external and internal borrowing in response to a change in the productivity of foreign affiliates. Using mandatory-reporting data on bank credit of Austrian MNEs and their FDI relationships with German affiliates for 2007–2022, we test our theoretical predictions empirically. We find that, relative to affiliate total assets, parent firms in Austria extend less internal credit to more productive German affiliates and reduce their own external borrowing from Austrian banks. Consistent with a higher external finance premium, more productive German affiliates reduce their (net) internal liabilities with Austrian parents and increase their external leverage instead. Further events and details: https://www.tuwien.at/en/mg/econ/events Best, Julia Hutter Julia Hutter TU Wien Institute of Statistics and Mathematical Methods in Economics Research Group Economics Phone: +43 1 58801 10531 Mail: julia.hutter@tuwien.ac.at<mailto:julia.hutter@tuwien.ac.at> https://econ.tuwien.ac.at/