Who's Afraid of Universal Banks? Bank Affiliations and Corporate Dividend Policy in Pre-World War I Belgium

Were Modern Capital Structure Theories Valid in Belgium Before World War I?

“…Moreover, they are able to raise larger amounts of external equity capital, with smaller underpricing and lower underwriting fees. The finding of Deloof et al (2006) that in the period considered in this study, Belgian firms with a banker on their board paid higher and more stable dividends than stand-alone firms is consistent with the certification role of bank directors.…”

“…It is consistent with the hypothesis that a banker on the board made it easier for firms to issue new equity, and with the hypothesis that lending bankers on the board exercised downward pressure on the debt ratio in order to protect the interests of the bank. However, as noted in Section 2(iii), the results of Deloof et al (2006) on dividend policy of Belgian firms in the period considered are inconsistent with the latter hypothesis.…”

“…It could therefore be argued that lending bankers on the board exercised downward pressure on the debt ratio in order to protect the interests of the lending bank (e.g., Kroszner and Strahan, 2001;and Byrd and Mizruchi, 2005). However, the results of Deloof et al (2006), who investigate the dividend policy of Belgian firms in the period considered, are inconsistent with this hypothesis. They find that firms with a bank director paid higher dividends, and higher dividends are against the interests of the lending bank(s).…”

Were Modern Capital Structure Theories Valid Before World War I?

“…However, as noted in section 2.3., the results of Deloof et al (2006) on dividend policy of Belgian firms in the period considered are inconsistent with the latter hypothesis.…”

“…Kroszner and Strahan, 2001;Byrd and Mizruchi, 2005). However, the results of Deloof et al (2006), who investigate the dividend policy of Belgian firms in the period considered, are inconsistent with this hypothesis.…”