Using detailed bank-firm matched data, we examine the impact of international financial flows on resource misallocation. We leverage a capital inflow boom in Italy to identify credit allocation patterns by banks with varying levels of exposure. Our findings indicate that banks with greater exposure to the capital inflows shift credit supply toward high-MRPK (marginal revenue product of capital) firms, which in turn reduces the dispersion of MRPK. We quantify the effects on aggregate total factor productivity (TFP), incorporating general equilibrium effects, and find significant positive gains