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What’s Common to Relationship Banking and Relationship Investing? Reflections within the Contractual Theory of the Firm

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Author Info
Doris Neuberger (University of Rostock)
Abstract

The financial systems in continental Europe are moving from bank intermediation to intermediation by non-bank institutional investors. The present paper examines to what extent this implies a substitution of relationship finance by arm’s length finance or just of one form of relationship finance by another. Within the contractual theory of the firm, we seek common features of relationship banking and relationship investing. Extending the governance structure approach, we show that both are hybrid governance forms, whose comparative advantages depend on two kinds of asset specificity. They are complements rather than substitutes to finance and control firms with different redeployability and information opaqueness of assets.

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Paper provided by EconWPA in its series Finance with number 0503001.

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Length: 34 pages
Date of creation: 02 Mar 2005
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Handle: RePEc:wpa:wuwpfi:0503001

Note: Type of Document - pdf; pages: 34
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Related research
Keywords: relationship banking; relationship investing; banks; institutional investors; corporate governance; contractual theories of the firm;

Find related papers by JEL classification:
G20 - Financial Economics - - Financial Institutions and Services - - - General
G30 - Financial Economics - - Corporate Finance and Governance - - - General
L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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