Bank–firm relationships, financing and firm performance in Germany

Agarwal, Rajshree; Elston, Julie Ann

doi:10.1016/s0165-1765(01)00427-x

Cited by 105 publications

(64 citation statements)

References 9 publications

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“…board representation) also seem to have higher survival rates (Elston 2004). Conversely, Agarwal and Elston (2001) and Chirinko and Elston (1998) do no find statistically significant differences between the profitability of bank-and non-bank controlled firms. In fact, firms whose ultimate owner is a bank or another financial institution appear to have lower productivity growth (Januszewski et al 2002).…”

Section: Monitoring By Blockholdersmentioning

confidence: 91%

“…Lehmann and Neuberger (2001) and Edwards and Fischer (1994) also document that banks intervene in case their corporate client runs into financial distress. Hopwever, Agarwal and Elston (2001) are not convinced about the firms benefit from increased access to capital, as their interest payments to debt ratio is also significantly higher. This suggests that German banks engage in rent-seeking activities.…”

Section: Creditor Monitoringmentioning

confidence: 99%

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Recent developments in German corporate governance

Goergen

Manjon

Renneboog

2008

International Review of Law and Economics

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We contrast the features of the German corporate governance system with those of other systems and discuss the recent regulatory initiatives. For example, the rules on insider trading and anti-trust have been strengthened. The Restructuring Act has been revised to prevent minority shareholders from stalling corporate restructuring via legal actions. The Takeover Act now prescribes a tender offer as soon as an investor acquires at least 30% of a fi rm's equity. However, the Act also allows anti-takeover devices. Despite the recent substantial changes, we conclude that the main characteristics of the German system are still in place.

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Section: Monitoring By Blockholdersmentioning

confidence: 91%

Section: Creditor Monitoringmentioning

confidence: 99%

Recent developments in German corporate governance

Goergen

Manjon

Renneboog

2008

International Review of Law and Economics

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“…As relational banks hold most of their borrowing firms' debt, they may prefer to avoid financing risky long-term investment projects, even if profitable, or decide to protect the firm management against profitable but risky hostile takeovers (Weinstein and Yafeh 1998;Chirinko and Elston 2006). In addition, in order to reduce negative externalities on other borrowers or to open up new business opportunities to them, relational banks might find it profitable to reveal private information about the firm's growth projects for which they are the main lender, thus dissipating the firm's crucial competitive advantages (Agarwal and Elston 2001). The importance of both these effects can be reasonably thought to increase with the size of borrowing, going so far as to overwhelm the information effect for large firms only.…”

Section: Why Should Main Banks Influence the Growth Of Borrowing Firms?mentioning

confidence: 99%

“…Weinstein and Yafeh (1998) and Miarka (1999) extend the analysis to a large sample of small and large Japanese enterprises in the periods 1977-1986 and 1985-1998, respectively, once again clearly rejecting the hypothesis that main bank clients grow more rapidly than other firms. Agarwal and Elston (2001) analyze the annual growth rate of sales for a sample of 100 large enterprises in Germany in the period [1970][1971][1972][1973][1974][1975][1976][1977][1978][1979][1980][1981][1982][1983][1984][1985][1986]. Even after wiping out the influence of unobserved individual fixed effects, their regression results indicate that close bank-firm relationships are not significantly associated with faster growth rates of firms (see also Elston 2002) 1 .…”

Section: Introductionmentioning

confidence: 99%

Long-lasting bank relationships and growth of firms

Gambini

Zazzaro

2011

Small Bus Econ

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Long-Lasting Bank Relationships and Growth of Firms Abstract A puzzling but consistent result in the empirical literature on banking is that firms with close bank ties do not grow faster than bank-independent firms. In this paper, we reconsider the link between relationship lending and firms' growth, distinguishing firms by size and "health". The idea is that the beneficial effects of relationship lending on information asymmetries can be compensated by other negative capture, risk and externality effects which make relational banks reluctant to support long-term growth projects of client firms, and that the strength of these compensating effects varies with firm size and health status. We explore the influence of long-lasting bank relationships on employment and asset growth of a large sample of Italian firms. The main finding is that relationship lending hampers the efforts of small firms to increase their size, while it mitigates the negative growth of troubled, medium-large enterprises. Terms of use: Documents inJEL-Code: G21, G34.Keywords: relationship lending, capture effects, firms' growth. We wish to thank Piero Alessandrini, Carlo Altavilla, Marco Lilla, Jack Lucchetti, Lars Norden, Andrea Presbitero, Franco Spinelli, Carmine Trecroci and Timo Wollmershäuser for comments and suggestions. Our thanks also go to seminar participants at the University of Brescia, University of Naples 'Parthenope', University of Milan and at the MoFiR conference on The changing geography of money, banking and finance in a post-crisis world (Ancona, Italy) and the Cesifo-Delphi conference on Financial markets, corporate governance and macroeconomic outcomes (Munich, Germany). Usual disclaimer applies. Alessandro Gambini 2

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“…However, the information is not fully available in financial markets. Through embedded ties, a commercial bank can access and accumulate the customer-specific information from past transaction experiences (Uzzi, 1999;Yasuda, 2005), through continuous monitoring process (Agarwal & Elston, 2001;Gorton & Schmid, 2000;Macey, 2000) or through friendship and family relationships (Hamilton, 1997;Peng & Luo, 2000;Yeung, 2006). In this manner, the commercial bank is able to pay less costs to investigate the credit of a customer and can therefore provide cheaper loan service.…”

Section: Social Capital To Mitigate Market Imperfectionsmentioning

confidence: 99%

Social capital and cross-selling within financial holding companies in an emerging economy

Chuang

Lin

2007

Asia Pacific J Manage

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Social capital is the goodwill available to individuals or groups from their network of relationships. It is widely believed that social capital is useful in facilitating and governing hazardous transactions. But how social capital, in the context of a financial holding company (FHC), actually facilitates cross-selling is unknown, especially in an emerging economy. This article maintains that effective cross-selling requires an FHC to first access and accumulate comprehensive and tacit customer-specific knowledge (the "where from" condition) and then share and leverage this knowledge to other applicable business opportunities (the "where to" condition). The role of social capital and embedded ties is found to be critical to this process. Finally, we argue that the major route for the effective cross-selling within an FHC is from the commercial banking division to the underwriting division. Hypotheses are tested on the transactional data collected from Taiwan, and empirical results provide broad support for our arguments.Keywords Social capital . Cross-selling . Financial holding companies . Emerging economiesIn many emerging economies in Asia, capital markets are not as efficient as those in developed countries. Recently, many management scholars have maintained that establishing large and diversified business conglomerates based Asia Pacific J Manage (2008) 25:71-91

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Bank–firm relationships, financing and firm performance in Germany

Cited by 105 publications

References 9 publications

Recent developments in German corporate governance

Recent developments in German corporate governance

Long-lasting bank relationships and growth of firms

Social capital and cross-selling within financial holding companies in an emerging economy

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