Bank Debt and Corporate Governance

66 Pages Posted: 20 Jul 2004 Last revised: 22 Jan 2009

See all articles by Victoria Ivashina

Victoria Ivashina

Harvard University; National Bureau of Economic Research (NBER)

Vinay B. Nair

University of Pennsylvania - Finance Department

Anthony Saunders

New York University - Leonard N. Stern School of Business

Nadia Massoud

Melbourne Business School, University of Melbourne

Abstract

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.

Keywords: Banks, Corporate Governance, Takeovers, Conflicts of Interest

JEL Classification: G21, G34

Suggested Citation

Ivashina, Victoria and Nair, Vinay B. and Saunders, Anthony and Massoud, Nadia, Bank Debt and Corporate Governance. EFA 2004 Maastricht Meetings Paper No. 4601; Review of Financial Studies. Available at SSRN: https://ssrn.com/abstract=557082 or http://dx.doi.org/10.2139/ssrn.557082

Victoria Ivashina (Contact Author)

Harvard University ( email )

Harvard Business School
Baker Library 233
Boston, MA 02163
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Vinay B. Nair

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-746-0004 (Phone)
215-898-6200 (Fax)

Anthony Saunders

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
9-190, MEC
New York, NY 10012-1126
United States
212-998-0711 (Phone)
212-995-4220 (Fax)

Nadia Massoud

Melbourne Business School, University of Melbourne ( email )

200 Leicester Street
Carlton, Victoria 3053 3186
Australia
+61 3 9349 8130 (Phone)
+61 3 9349 8136 (Fax)

HOME PAGE: http://mbs.edu/facultyresearch/facultydirectory/Pages/NadiaMassoud.aspx

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