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Firm performance, financial institutions and corporate governance in the Netherlands

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Chirinko, Bob (Groningen University)

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Abstract

This paper analyses the impact of share ownership, creditorship and net-working by financial institutions on the performance of 94 Dutch non-financial firms in the period 1992-1996. We find a nonlinear relationship between firm performance and ownership by banks. Because of various defense mechanisms the role of the shareholder is very limited in the Netherlands. Financial institu-tions are, however, in a position to discipline firm management through other channels. It turns out that there is a direct positive link between share ownership by banks and the firms’ short-term bank loans, which indicates the existence of a financing channel. Financial institutions are also represented on the supervi-sory boards of firms and vice versa, which is an example of networking. This suggests that besides creditorship networking may be an additional disciplinary device for financial institutions. Here we find that there is a significant posi-tive relationship between share ownership by insurance companies and pension funds and the probability of networking.

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Paper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 99E40.

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Date of creation: 1999
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Handle: RePEc:dgr:rugsom:99e40

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  8. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December. [Downloadable!] (restricted)
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  9. Becht, Marco, 1999. "European corporate governance: Trading off liquidity against control," European Economic Review, Elsevier, vol. 43(4-6), pages 1071-1083, April. [Downloadable!] (restricted)
  10. Denis, David J & Denis, Diane K & Sarin, Atulya, 1997. " Agency Problems, Equity Ownership, and Corporate Diversification," Journal of Finance, American Finance Association, vol. 52(1), pages 135-60, March. [Downloadable!] (restricted)
  11. Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, 04. [Downloadable!] (restricted)
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