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Why don't banks take stock?

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  • Mitchell Berlin

Abstract

Banks in the United States are forbidden to hold stock in nonfinancial firms under most circumstances. The same is not true of banks in other countries. But are U.S. banks really shackled compared with their foreign counterparts? Do such restrictions make a difference in banks' behavior? Mitchell Berlin discusses these and other questions about banks' financial claims in nonfinancial firms and offers some possible answers.

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Bibliographic Info

Article provided by Federal Reserve Bank of Philadelphia in its journal Business Review.

Volume (Year): (2000)
Issue (Month): May ()
Pages: 3-15

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Handle: RePEc:fip:fedpbr:y:2000:i:may:p:3-15

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Keywords: Bank stocks ; Stocks;

References

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  1. Dewatripont, Mathias & Tirole, Jean, 1994. "A Theory of Debt and Equity: Diversity of Securities and Manager-Shareholder Congruence," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 1027-54, November.
  2. Langohr, Herwig & Santomero, Anthony M, 1985. "The Extent of Equity Investment by European Banks: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(2), pages 243-52, May.
  3. Berlin, Mitchell & John, Kose & Saunders, Anthony, 1996. "Bank Equity Stakes in Borrowing Firms and Financial Distress," Review of Financial Studies, Society for Financial Studies, vol. 9(3), pages 889-919.
  4. Loretta J. Mester, 1992. "Banking and commerce: a dangerous liaison?," Business Review, Federal Reserve Bank of Philadelphia, issue May, pages 17-29.
  5. Mitchell Berlin & Loretta J. Mester, 2000. "Optimal Financial Contracts for Large Investors: The Role of Lender Liability," Center for Financial Institutions Working Papers 99-33, Wharton School Center for Financial Institutions, University of Pennsylvania.
  6. James, Christopher, 1996. " Bank Debt Restructurings and the Composition of Exchange Offers in Financial Distress," Journal of Finance, American Finance Association, vol. 51(2), pages 711-27, June.
  7. W. Carl Kester, 1991. "Japanese Corporate Governance And The Conservation Of Value In Financial Distress," Journal of Applied Corporate Finance, Morgan Stanley, vol. 4(2), pages 98-105.
  8. Berglof, Erik & von Thadden, Ernst-Ludwig, 1994. "Short-Term versus Long-Term Interests: Capital Structure with Multiple Investors," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 1055-84, November.
  9. Mitchell Berlin, 1996. "For better and for worse: three lending relationships," Business Review, Federal Reserve Bank of Philadelphia, issue Nov, pages 3-12.
  10. Billett, Matthew T & Flannery, Mark J & Garfinkel, Jon A, 1995. " The Effect of Lender Identity on a Borrowing Firm's Equity Return," Journal of Finance, American Finance Association, vol. 50(2), pages 699-718, June.
  11. Sheard, Paul, 1989. "The main bank system and corporate monitoring and control in Japan," Journal of Economic Behavior & Organization, Elsevier, vol. 11(3), pages 399-422, May.
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Cited by:
  1. Roman Inderst & Holger M. Mueller, 2006. "Informed Lending and Security Design," Journal of Finance, American Finance Association, vol. 61(5), pages 2137-2162, October.

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