Do Controlling Shareholders Matter for the Conditions of Bank Loans? Evidence From Spain

Abstract

This paper analyses the influence of large controlling shareholders on the terms of bank loans for a sample of 984 loans to 261 nonfinancial Spanish public and private firms over the period 2001-2017. The results show that the presence of large controlling shareholders increases interest rate spread and reduces loan maturity. A less evenly balanced distribution of ownership among large shareholders is associated with higher loan spreads. During the crisis, non-financial Spanish firms obtained worse conditions on bank loans, as loan spread increased and maturity decreased. Furthermore, the maturity of bank loans was found to be positively related to the presence of families as large controlling shareholders during the financial crisis, reflecting that these shareholders reduced the agency costs of debt.

Keywords: controlling shareholders, noncontrolling shareholders, types of shareholders, agency costs of debt, loan terms

JEL Classification: G01, G21, G32