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Why don't banks take stock?

Author

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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.

Suggested Citation

  • Mitchell Berlin, 2000. "Why don't banks take stock?," Business Review, Federal Reserve Bank of Philadelphia, issue May, pages 3-15.
    • Handle: RePEc:fip:fedpbr:y:2000:i:may:p:3-15
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    File URL: https://www.philadelphiafed.org/-/media/frbp/assets/economy/articles/business-review/2000/may-june/brmj00mb.pdf
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    References listed on IDEAS

    as
    1. Mitchell Berlin & Loretta J. Mester, 2000. "Optimal financial contracts for large investors: the role of lender liability," Working Papers 00-1, Federal Reserve Bank of Philadelphia.
    2. 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, June.
    3. Berlin, Mitchell & John, Kose & Saunders, Anthony, 1996. "Bank Equity Stakes in Borrowing Firms and Financial Distress," The Review of Financial Studies, Society for Financial Studies, vol. 9(3), pages 889-919.
    4. Mathias Dewatripont & Jean Tirole, 1994. "A Theory of Debt and Equity: Diversity of Securities and Manager-Shareholder Congruence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(4), pages 1027-1054.
    5. 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 243-252, May.
    6. Erik Berglöf & Ernst-Ludwig von Thadden, 1994. "Short-Term versus Long-Term Interests: Capital Structure with Multiple Investors," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(4), pages 1055-1084.
    7. James, Christopher, 1995. "When Do Banks Take Equity in Debt Restructurings?," The Review of Financial Studies, Society for Financial Studies, vol. 8(4), pages 1209-1234.
    8. 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.
    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. 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 711-727, June.
    11. Loretta J. Mester, 1992. "Banking and commerce: a dangerous liaison?," Business Review, Federal Reserve Bank of Philadelphia, issue May, pages 17-29.
    12. 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.
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    Cited by:

    1. Laurent Vilanova, 2002. "Risque juridique et rôle des banques dans le gouvernement des entreprises," Revue Finance Contrôle Stratégie, revues.org, vol. 5(4), pages 137-175, December.
    2. 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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    Keywords

    Bank stocks; Stocks;

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