TitleFinance, Control and Profitability: An Evaluation of German Bank Influence
Publication TypeJournal Articles
Year of Publication2006
AuthorsChirinko, RS, Elston, J
JournalJournal of Economic Behavior and Organization
Date Published2006
KeywordsFinance, OSU-Cascades

Bank intermediated finance has been cited frequently as the preferred means for channeling funds from savers to firms. Germany is the prototypical economy where powerful universal banks allegedly exert substantial influence over firms. Despite frequent assertions about the advantages of a bank relation, empirical support is mixed. With a unique dataset and a focus on the fragility/sturdiness of inferences, this paper evaluates German bank influence in terms of three hypotheses: (1) do bank influenced firms enjoy lower finance costs? (No); (2) is bank influence a solution to control problems? (Yes); (3) do bank influenced firms have higher profitability? (No).