Bank shareholding and lending: complementarity or substitution? Some evidence from a panel of large Italian firms!
Mattesini FabrizioBarucci Emilio
CEIS Research Paper
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 and 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.
Keywords: Lending, cross shareholding, conflict of interest
JEL codes: G21, G24
Date: Monday, July 14, 2008
Revision Date: Monday, July 14, 2008