Corporate-Finance Benefits from Universal Banking: Germany and the United States, 1870-1914
AbstractLimitations on bank consolidation and branching in the United States at an early date effectively limited the scope of commercial banks and their involvement in financing large-scale industry, and increased information and transaction costs of issuing securities. In contrast, German industry was financed by large-scale universal banks who maintained long-term relationships with firms, involving ongoing monitoring and disciplining of management, and underwriting. Low costs of German industrial finance are reflected in lower investment banking spreads on securities issues and a higher propensity to issue equity relative to the United States.
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Date of creation: Jul 1993
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- N2 - Economic History - - Financial Markets and Institutions
- G2 - Financial Economics - - Financial Institutions and Services
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