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Cross Ownership, Loan Commitment, Managerial Delegation and the “Prisoner’s Dilemma”

Author

Listed:
  • Qu, Haitao
  • Wang, Leonard F.S.
  • Wu, Di
  • Yang, Can
  • Sun, Ji

Abstract

This paper investigates the relationship between cross ownership, sales delegation and loan commitment. We find that under sales delegation, a higher degree of cross ownership decreases the optimal bank loan interest rate, which is beneficial to the firm profits. However, cross ownership reduces the firm output, leading a lower consumer surplus and social welfare. The policy implication is that antitrust authority and banking regulatory bureau should “coordinate” policies to mitigate the concerned stakeholders’ conflicts.

Suggested Citation

  • Qu, Haitao & Wang, Leonard F.S. & Wu, Di & Yang, Can & Sun, Ji, 2022. "Cross Ownership, Loan Commitment, Managerial Delegation and the “Prisoner’s Dilemma”," MPRA Paper 129075, University Library of Munich, Germany, revised 02 Nov 2022.
    • Handle: RePEc:pra:mprapa:129075
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    More about this item

    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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