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Universal Banking, Conflicts of Interest and Firm Growth

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  • Lili Xie

    () (Department of Economics, Ball State University)

Abstract

This paper studies the relationship between universal banking and firm performance. With 40 developing and developed countries, I find that the overall effect of universal banking on firm growth is negative. This suggests that the negative effect of conflicts of interest dominates the positive effect of economies of scale and scope in universal banking. However, in countries with stronger protection of creditors' rights and higher information effciency, conflicts of interest are less likely and the negative relationship between universal banking and firm growth is significantly weaker.

Suggested Citation

  • Lili Xie, 2007. "Universal Banking, Conflicts of Interest and Firm Growth," Working Papers 200703, Ball State University, Department of Economics, revised Jul 2007.
  • Handle: RePEc:bsu:wpaper:200703
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    File URL: http://web.bsu.edu/cob/econ/research/papers/bsuecwp200703xie.pdf
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    References listed on IDEAS

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    Cited by:

    1. Lee, Chi-Chuan & Huang, Tai-Hsin, 2017. "Cost efficiency and technological gap in Western European banks: A stochastic metafrontier analysis," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 161-178.
    2. Shehzad, Choudhry Tanveer & De Haan, Jakob, 2013. "Was the 2007 crisis really a global banking crisis?," The North American Journal of Economics and Finance, Elsevier, vol. 24(C), pages 113-124.

    More about this item

    Keywords

    Universal Banking; Firm Incentive; Con°icts of Interest; Economies of Scope; Economies of Scale.;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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