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Universal Banking, Conflicts of Interest and Firm Growth

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  • Lili Xie

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    (Department of Economics, Ball State University)

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    Abstract

    This paper studies the relationship between universal banking and firm performance. With 40 developing and developed countries, I find that the overall effect of universal banking on firm growth is negative. This suggests that the negative effect of conflicts of interest dominates the positive effect of economies of scale and scope in universal banking. However, in countries with stronger protection of creditors' rights and higher information effciency, conflicts of interest are less likely and the negative relationship between universal banking and firm growth is significantly weaker.

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    File URL: http://econfac.iweb.bsu.edu/research/workingpapers/bsuecwp200703xie.pdf
    File Function: First version, 2007
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    Bibliographic Info

    Paper provided by Ball State University, Department of Economics in its series Working Papers with number 200703.

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    Length: 35 pages
    Date of creation: Jul 2007
    Date of revision: Jul 2007
    Publication status: Forthcoming in Journal of Financial Services Research
    Handle: RePEc:bsu:wpaper:200703

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    Related research

    Keywords: Universal Banking; Firm Incentive; Con°icts of Interest; Economies of Scope; Economies of Scale.;

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