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Universal banks and corporate control: evidence from the global syndicated loan market

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  • Ferreira, Miguel A.
  • Matos, Pedro

Abstract

Banks play a role in the corporate governance of firms as well as acting as debt financiers around the world. Universal banks can have control over borrowing firms by representation on the board of directors or by holding shares through direct stakes or institutional holdings. We investigate the effects of these bank-firm governance links on the global syndicated loan market. We find that banks are more likely to act as lead arrangers, charge higher interest rate spreads and face less credit risk after origination when they have some role in firm's governance. This increase in interest rate spread is less pronounced for borrowers with access to international capital markets. Our results are robust to several methods to correct for the endogeneity of the bank-firm governance link. Our findings suggest that the benefits of bank involvement in firms' governance accrue mostly to the banks. JEL Classification: G21, G32

Suggested Citation

  • Ferreira, Miguel A. & Matos, Pedro, 2009. "Universal banks and corporate control: evidence from the global syndicated loan market," Working Paper Series 1066, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:20091066
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    Cited by:

    1. Anagnostopoulou, Seraina C. & Drakos, Konstantinos, 2016. "Bank loan terms and conditions: Is there a macro effect?," Research in International Business and Finance, Elsevier, vol. 37(C), pages 269-282.
    2. Demirguc-Kunt, Asli & Horvath, Balint & Huizinga, Harry, 2017. "Foreign Banks and International Transmission of Monetary Policy: Evidence from the Syndicated Loan Market," CEPR Discussion Papers 11796, C.E.P.R. Discussion Papers.
    3. Guglielmo Barone & Litterio Mirenda & Sauro Mocetti, 2016. "Losing my connection: The role of interlocking directorates," Working Paper series 16-09, Rimini Centre for Economic Analysis.
    4. Laetitia Lepetit & Frank Strobel, 2012. "Bank equity Involvement in Industrial Firms and Bank Risk," Working Papers hal-00916709, HAL.
    5. repec:kap:jfsres:v:53:y:2018:i:1:d:10.1007_s10693-016-0243-4 is not listed on IDEAS
    6. repec:eee:jbfina:v:80:y:2017:i:c:p:1-13 is not listed on IDEAS
    7. Dietrich, Diemo & Vollmer, Uwe, 2012. "Are universal banks bad for financial stability? Germany during the world financial crisis," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(2), pages 123-134.
    8. Christophe J. Godlewski & Bulat Sanditov, 2015. "Financial institution network and the certification value of bank loans," Post-Print hal-01273250, HAL.
    9. Guglielmo Maria Caporale & Suman Lodh & Monomita Nandy, 2015. "How Has the Global Financial Crisis Affected Syndicated Loan Terms in Emerging Markets? Evidence from China," CESifo Working Paper Series 5353, CESifo Group Munich.
    10. repec:eee:jfinec:v:126:y:2017:i:1:p:122-146 is not listed on IDEAS
    11. repec:eee:accoun:v:52:y:2017:i:2:p:178-200 is not listed on IDEAS
    12. Joao Amaro de Matos & Joao Mergulhao, 2015. "Debt, Information Asymmetry and Bankers on Board," FEUNL Working Paper Series wp597, Universidade Nova de Lisboa, Faculdade de Economia.
    13. Berg, Tatjana & Horsch, Philipp & Schmid, Markus, 2015. "Sharing a Director with a Peer," Working Papers on Finance 1507, University of St. Gallen, School of Finance.
    14. repec:kap:jfsres:v:51:y:2017:i:3:d:10.1007_s10693-016-0249-y is not listed on IDEAS
    15. Ongena, Steven & Tümer-Alkan, Günseli & Vermeer, Bram, 2011. "Corporate choice of banks: Decision factors, decision maker, and decision process -- First evidence," Journal of Corporate Finance, Elsevier, vol. 17(2), pages 326-351, April.
    16. repec:eee:jaecon:v:64:y:2017:i:1:p:78-97 is not listed on IDEAS
    17. Liangliang Jiang & Yi Zhu, 2014. "Effects of Foreign Institutional Ownership on Foreign Bank Lending: Some Evidence for Emerging Markets," International Review of Finance, International Review of Finance Ltd., vol. 14(2), pages 263-293, June.

    More about this item

    Keywords

    corporate boards; ownership; syndicated loans; universal banking;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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