Academic Journal
Finance, Control and Profitability: An Evaluation of German Bank Influence
"Journal of Economic Behavior and Organization" 20 pages 2006
Journal Details
Journal of Economic Behavior and Organization, 2006 Vol. 59 Issue 1 Pages 69-88
Finance
Journal Article, Academic Journal
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).