Related Banks and Investment Efficiency within Business Groups

59 Pages Posted: 2 Aug 2021 Last revised: 1 Jun 2022

See all articles by Craig Brown

Craig Brown

Krannert School of Management, Purdue University

M. Deniz Yavuz

Purdue University - Krannert School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: May 31, 2022

Abstract

This paper examines the role of a related bank in the investment efficiency of business-group firms. We show that a bank is associated with less investment sensitivity to investment opportunities for family group firms, especially in financially dependent industries. There is evidence of inefficient related lending in that the weakened investment sensitivity for family firms is linked to related-bank net-charge-offs. Alternatively, a bank is associated with greater investment sensitivity for family group firms in well-developed banking systems, and for non-family group firms in financially dependent industries. Ownership type and financial development seem pivotal for the role of a related bank.

Keywords: Banks, Investment Efficiency, Business Groups, Financial Development

JEL Classification: G34, G31, G21, G28, K20

Suggested Citation

Brown, Craig O. and Yavuz, M. Deniz, Related Banks and Investment Efficiency within Business Groups (May 31, 2022). Available at SSRN: https://ssrn.com/abstract=3896617 or http://dx.doi.org/10.2139/ssrn.3896617

Craig O. Brown (Contact Author)

Krannert School of Management, Purdue University ( email )

506 Krannert Building
403 W. State Street
West Lafayette, IN 47907-2056
United States
(765) 494-8725 (Phone)

HOME PAGE: http://https://sites.google.com/view/craigobrown

M. Deniz Yavuz

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
90
Abstract Views
374
Rank
392,975
PlumX Metrics