IDEAS home Printed from https://ideas.repec.org/a/eee/reecon/v52y1998i3p233-253.html
   My bibliography  Save this article

Close relationships between banks and firms: is it good or bad?

Author

Listed:
  • CERASI, VITTORIA
  • DALTUNG, SONJA

Abstract

This paper investigates the issues involved in cross-ownership between banks and firms. The idea is that congruity among the parties in control of the bank and the firm allows to save on monitoring costs, but it gives rise to a conflict of interest between on one hand the parties in control of the bank and on the other hand the outside investors, as for example depositors, of the bank. Moreover, when monitoring of borrowing is important and unobservable by outsiders, there is interdependency among incentives, so that the conflict of interest may reduce even further incentives to monitor all other projects in the bank portfolio. Nevertheless, the paper shows that there are benefits from cross-ownership, whenever the bank involved in the relationship is debt financed and well diversified.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Cerasi, Vittoria & Daltung, Sonja, 1998. "Close relationships between banks and firms: is it good or bad?," Research in Economics, Elsevier, vol. 52(3), pages 233-253, September.
  • Handle: RePEc:eee:reecon:v:52:y:1998:i:3:p:233-253
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1090-9443(98)90169-7
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Saunders, Anthony, 1994. "Banking and commerce: An overview of the public policy issues," Journal of Banking & Finance, Elsevier, vol. 18(2), pages 231-254, January.
    2. Kroszner, Randall S & Rajan, Raghuram G, 1994. "Is the Glass-Steagall Act Justified? A Study of the U.S. Experience with Universal Banking before 1933," American Economic Review, American Economic Association, vol. 84(4), pages 810-832, September.
    3. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1990. "Bank Monitoring and Investment: Evidence from the Changing Structure of Japanese Corporate Banking Relationships," NBER Chapters,in: Asymmetric Information, Corporate Finance, and Investment, pages 105-126 National Bureau of Economic Research, Inc.
    4. Saunders, Anthony & Walter, Ingo, 1994. "Universal Banking in the United States: What Could We Gain? What Could We Lose?," OUP Catalogue, Oxford University Press, number 9780195080698.
    5. Cerasi, Vittoria & Daltung, Sonja, 2000. "The optimal size of a bank: Costs and benefits of diversification," European Economic Review, Elsevier, vol. 44(9), pages 1701-1726, October.
    6. George J. Benston, 1994. "Universal Banking," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 121-143, Summer.
    7. Gorton, Gary & Schmid, Frank A., 2000. "Universal banking and the performance of German firms," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 29-80.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. M. Florio, 1998. "Economic Theory, Russia and the Fading "Washington Consensus"," Departmental Working Papers 1998-08, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    2. Cerasi, Vittoria & Daltung, Sonja, 2000. "The optimal size of a bank: Costs and benefits of diversification," European Economic Review, Elsevier, vol. 44(9), pages 1701-1726, October.
    3. Massimo Florio & R. LUCCHETTI & F. QUAGLIA, 1998. "Grandi e piccole imprese nel Centro-Nord e nel Mezzogiorno: un modello empirico dell'impatto occupazionale nel lungo periodo," Departmental Working Papers 1998-02, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    4. Massimo Florio & Anna Giunta, 1998. "Planning Contracts in Southern Italy, 1986-1997: a Prelimary Evaluation," Departmental Working Papers 1998-04, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    5. Giuseppe Bognetti, 1999. "Nuove forme di gestione dei servizi pubblici," Departmental Working Papers 1999-04, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:reecon:v:52:y:1998:i:3:p:233-253. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/622941 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.