Bank Debt and Corporate Governance
Harvard University; National Bureau of Economic Research (NBER)
Vinay B. Nair
University of Pennsylvania - Finance Department
New York University - Leonard N. Stern School of Business
York University - Schulich School of Business
EFA 2004 Maastricht Meetings Paper No. 4601
Review of Financial Studies
In this paper, we investigate the disciplining role of banks and bank debt in the market for corporate control. We find that relationship bank lending intensity and bank client network have positive effects on the probability of a borrowing firm becoming a target. This effect is enhanced in cases where the target and acquirer have a relationship with the same bank. Moreover, we utilize an experiment to show that the effects of relationship bank lending intensity on takeover probability are not driven by endogeneity. Finally, we also investigate reasons motivating a bank's informational role in the market for corporate control.
Number of Pages in PDF File: 66
Keywords: Banks, Corporate Governance, Takeovers, Conflicts of Interest
JEL Classification: G21, G34working papers series
Date posted: July 20, 2004 ; Last revised: January 22, 2009
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