Bank Shareholding and Lending: Complementarity or Substitution? Some Evidence from a Panel of Large Italian Firms

31 Pages Posted: 3 Apr 2008

See all articles by Emilio Barucci

Emilio Barucci

University of Pisa - Department of Economics

Fabrizio Mattesini

University of Rome Tor Vergata - Faculty of Economics

Date Written: March 1, 2008

Abstract

The paper studies the motivations behind banks' shareholding of non-financial firms using a panel of large Italian companies in the period 1994-2000. Empirical evidence shows that banks are shareholders of companies that are less profitable, have experienced slower growth, are more indebted and are endowed with collateral and have hard time to repay their debt out of current income. Banks are more likely to hold shares in companies they lend to. Overall the evidence suggests that there is complementarity between bank equity holding and lending. A plausible explanation is the shareholder-debtholder conflict, the evidence is weakly compatible with governance and information hypotheses.

Keywords: Lending, cross shareholding, conflict of interest

JEL Classification: G21, G24

Suggested Citation

Barucci, Emilio and Mattesini, Fabrizio, Bank Shareholding and Lending: Complementarity or Substitution? Some Evidence from a Panel of Large Italian Firms (March 1, 2008). CEIS Working Paper No. 118, Available at SSRN: https://ssrn.com/abstract=1115849 or http://dx.doi.org/10.2139/ssrn.1115849

Emilio Barucci (Contact Author)

University of Pisa - Department of Economics ( email )

via Ridolfi 10
I-56100 Pisa, PI 56100
Italy

Fabrizio Mattesini

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia n.2
Rome, rome 00100
Italy

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