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Bank shareholding and lending: Complementarity or substitution? Some evidence from a panel of large Italian firms

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  • Barucci, Emilio
  • Mattesini, Fabrizio

Abstract

The paper studies the motivations behind banks' shareholding of non-financial firms using a panel of large Italian companies in the period 1994-2000. Empirical evidence shows that banks are shareholders of companies that are less profitable, have experienced slower growth, are more indebted, are endowed with collateral and have hard time to repay their debt out of current income. Banks are more likely to hold shares in companies they lend to. Overall the evidence suggests that there is complementarity between bank equity holding and lending. A plausible explanation is the shareholder-debtholder conflict, the evidence is weakly compatible with governance and information hypotheses.

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  • Barucci, Emilio & Mattesini, Fabrizio, 2008. "Bank shareholding and lending: Complementarity or substitution? Some evidence from a panel of large Italian firms," Journal of Banking & Finance, Elsevier, vol. 32(10), pages 2237-2247, October.
    • Handle: RePEc:eee:jbfina:v:32:y:2008:i:10:p:2237-2247
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    2. Laetitia Lepetit & Frank Strobel, 2012. "Bank equity Involvement in Industrial Firms and Bank Risk," Working Papers hal-00916709, HAL.
    3. Marco Simoni, 2019. "Institutional Roots of Economic Decline: Lessons from Italy," LEQS – LSE 'Europe in Question' Discussion Paper Series 143, European Institute, LSE.
    4. Jing Zeng & Xiongyuan Wang & Kam C. Chan, 2021. "Does the value‐added tax Reform increase a firm’s collateral bank loans? Evidence from China," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 29(4), pages 681-710, October.
    5. Rabah Amir & Michael Troege, 2011. "On the effects of banks’ equity ownership on credit markets," Annals of Finance, Springer, vol. 7(1), pages 31-52, February.
    6. Mangena, Musa & Priego, Alba Maria & Manzaneque, Montserrat, 2020. "Bank power, block ownership, boards and financial distress likelihood: An investigation of Spanish listed firms," Journal of Corporate Finance, Elsevier, vol. 64(C).
    7. Lieven Baert & Rudi Vander Vennet, 2009. "Bank Ownership, Firm Value and Firm Capital Structure in Europe," Working Paper / FINESS 2.2, DIW Berlin, German Institute for Economic Research.
    8. Mário Santos & António Moreira & Elisabete Vieira, 2014. "Ownership concentration, contestability, family firms, and capital structure," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(4), pages 1063-1107, November.
    9. Zemzem, Ahmed & Guesmi, Khaled & Ftouhi, Khaoula, 2017. "The role of banks in the governance of non-financial firms: Evidence from Europe," Research in International Business and Finance, Elsevier, vol. 42(C), pages 285-294.
    10. Ines Chaabouni & Anis Jarboui, 2016. "Effect of board`s skills on stakeholder value," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 6(4), pages 84-100, April.
    11. Ruiz-Mallorquí, María Victoria & Santana-Martín, Domingo J., 2011. "Dominant institutional owners and firm value," Journal of Banking & Finance, Elsevier, vol. 35(1), pages 118-129, January.
    12. João A. C. Santos & Kristin E. Wilson, 2017. "Does Banks’ Corporate Control Lower Funding Costs? Evidence from US Banks’ Control Over Firms’ Voting Rights," Journal of Financial Services Research, Springer;Western Finance Association, vol. 51(3), pages 283-311, June.
    13. Takanori Tanaka, 2009. "Managerial Entrenchment and Corporate Bond Financing: Evidence from Japan," Discussion Papers in Economics and Business 09-10, Osaka University, Graduate School of Economics.
    14. Suzuki, Katsushi, 2010. "Do the equity holding and soundness of bank underwriters affect issue costs of SEOs?," Journal of Banking & Finance, Elsevier, vol. 34(5), pages 984-995, May.
    15. Lai, Shaojie & Li, Xiaorong & Chan, Kam C., 2020. "Does bank shareholding impact corporate innovation? Evidence from China," Economic Modelling, Elsevier, vol. 92(C), pages 57-69.

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    More about this item

    Keywords

    Lending Cross shareholding Conflict of interest;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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