Banks as Shareholders: The Spanish Model of Corporate Governance

CORPORATE GOVERNANCE: ISSUES AND CHALLENGES, Frank J. Columbus, ed., Nova Science Publishers, Forthcoming

35 Pages Posted: 6 Jul 2007

See all articles by Valentin Azofra-Palenzuela

Valentin Azofra-Palenzuela

University of Valladolid - Department of Finance and Accounting

Félix J. López-Iturriaga

University of Valladolid - Department of Financial Economics and Accounting; National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy

Fernando Tejerina Gaite

University of Valladolid

Abstract

Compared to the Anglo-Saxon framework on which most of the financial research has focused, in many European corporate systems such as Spain, banks and other financial intermediaries are more important than capital markets. In addition to lending, banks usually own significant proportions of shares and sit at the board of directors. Our results for a sample of 142 non-financial firms between 1999 and 2002 show that banks play an outstanding role in the corporate governance of the Spanish firms. More specifically, due to the banking specialization in monitoring and control, we find that banks have a dual and very relevant influence on the performance of the firms. For bank-controlled firms, bank shareholdings can enable colluding interactions among banks and, thus, reduce the performance of the firm. On the contrary, for non-bank controlled firms, bank shareholdings improve the corporate governance and increase the performance of the firm. This effect is particularly significant for the firms in which bank scrutiny is more crucial: when the largest shareholder has voting rights in excess of his cash flow rights, and when the control of the largest shareholder can be more contested.

Keywords: Banks, corporate governance, ownership structure, Spain

JEL Classification: G21, G31, G34

Suggested Citation

Azofra-Palenzuela, Valentin and Lopez-Iturriaga, Felix Javier and Tejerina Gaite, Fernando, Banks as Shareholders: The Spanish Model of Corporate Governance. CORPORATE GOVERNANCE: ISSUES AND CHALLENGES, Frank J. Columbus, ed., Nova Science Publishers, Forthcoming. Available at SSRN: https://ssrn.com/abstract=998307

Valentin Azofra-Palenzuela (Contact Author)

University of Valladolid - Department of Finance and Accounting ( email )

Avda. Valle Esgueva 6
47011 Valladolid
Spain

Felix Javier Lopez-Iturriaga

University of Valladolid - Department of Financial Economics and Accounting ( email )

Avda. Valle Esgueva 6
47011 Valladolid
Spain
+34 983 184 395 (Phone)
+34 983 183830 (Fax)

HOME PAGE: http://www2.eco.uva.es/flopez

National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy ( email )

Lebedeva,27
Perm, Perm 614070
Russia

Fernando Tejerina Gaite

University of Valladolid ( email )

8 C/Plaza de Santa Cruz
47002 Valladolid, Valladolid 47002
Spain

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