Geopolitical Risks and Bank Lending in Taiwan: An Empirical Analysis

This study analyzes short- and long-term loans from publicly listed companies in Taiwan from 1999 to 2021 to examine the relationship between geopolitical risks (GPRs) and loan interest rates. The results indicate a significant positive correlation between GPRs and borrowing rates — when companies face higher GPRs, banks perceive them as riskier and impose higher interest rates. Additionally, state-owned banks tend to charge higher rates under elevated GPRs, whereas private banks do the opposite. However, during financial crises and the COVID-19 pandemic, increased GPRs unexpectedly led to lower loan interest rates. Furthermore, firms with higher cash holdings gain greater trust from banks, securing lower borrowing costs. These findings provide valuable insights for the financing decisions of companies in Taiwan and other regions facing high GPRs.