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Bankers and the Performance of German Firms

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  • Maug, Ernst

    (Chair for Corporate Finance, University of Mannheim and Sonderforschungsbereich 504)

  • Dittmann, Ingolf

    (Erasmus School of Economics Rotterdam)

  • Schneider, Christoph

    (Chair for Corporate Finance, University of Mannheim)

Abstract

In this paper we analyze the impact of banks on German non-financial companies through ownership stakes and board representation. We find that the correlation between firm value and bank representation is negative and highly significant. By exploring the time series dimension of our dataset, we show that bank presence causes lower performance while there is no evidence of causality in the opposite direction. Our results suggest that bankers are attracted to the boards of those companies where they can extract larger benefits of control: Banks are systematically more represented on the boards of companies that are larger, have more intangible assets and offer higher board remuneration. There is little evidence that banks facilitate lending or monitor existing debt contracts. Whereas block ownership by non-banks is associated with better performance, there is no such relationship for banks.

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Bibliographic Info

Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 07-40.

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Length: 36 pages
Date of creation: 26 Jun 2007
Date of revision:
Handle: RePEc:xrs:sfbmaa:07-40

Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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  1. Burak Güner, A. & Malmendier, Ulrike & Tate, Geoffrey, 2008. "Financial expertise of directors," Journal of Financial Economics, Elsevier, vol. 88(2), pages 323-354, May.
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