Finance, control, and profitability: the influence of German banks

Bank intermediated finance has been cited frequently as the preferred means for channeling funds from savers to firms. Germany is the prototypical economy where universal banks allegedly exert substantial influence over firms. Despite frequent assertions about the considerable power of German banks and the advantages of a bank relation, empirical support is mixed. With a unique dataset and a focus on the fragility/sturdiness of inferences, this paper evaluates German bank influence in terms of three hypotheses : 1) do bank influenced firms enjoy lower finance costs? [No]; 2) is bank influence a solution to control problems? [Yes]; 3) do bank influenced firms have higher profitability? [No]. Coupled with results about the control consequences of concentrated ownership, these results suggest that bank influence serves as a substitute control mechanism, one of several available for addressing corporate control problems.

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Year of publication:	2004
Authors:	Elston, Julie Ann ; Chirinko, Robert S.
Publisher:	Jena : Max-Planck-Institut für Ökonomik
Subject:	Universalbank \| Finanzierung \| Lieferanten-Kunden-Beziehung \| Corporate Governance \| Kapitalkosten \| Rentabilität \| Schätzung \| Deutschland \| German Banks \| Corporate Finance and Governance

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Series:	Papers on Entrepreneurship, Growth and Public Policy ; 2604
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	494499672 [GVK] hdl:10419/19971 [Handle]
Classification:	G32 - Financing Policy; Capital and Ownership Structure ; G21 - Banks; Other Depository Institutions; Mortgages ; G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
Source:	EconStor

Persistent link: https://www.econbiz.de/10010261492