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Bank Ownership, Firm Value and Firm Capital Structure in Europe

Author

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  • Lieven Baert
  • Rudi Vander Vennet

Abstract

We investigate whether or not banks play a positive role in the ownership structure of European listed firms. We distinguish between banks and other institutional investors as shareholders and examine empirically the relationship between financial institution ownership and the performance of the firms in which they hold equity. Our main finding is that after controlling for the capital structure decision of the firms and the ownership decision of financial institutions in a simultaneous equations model, we find that there is a negative relationship between financial institution ownership and the market value of firms, measured as the Tobin's Q. This is in contradiction with the monitoring hypothesis.

Suggested Citation

  • Lieven Baert & Rudi Vander Vennet, 2009. "Bank Ownership, Firm Value and Firm Capital Structure in Europe," Working Paper / FINESS 2.2, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwfin:diwfin2.2
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.96133.de/diw_finess_02020.pdf
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    Cited by:

    1. Mariya Hake, 2012. "Banking Sector Concentration and Firm Indebtedness: Evidence from Central and Eastern Europe," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 48-68.
    2. Zemzem, Ahmed & Guesmi, Khaled & Ftouhi, Khaoula, 2017. "The role of banks in the governance of non-financial firms: Evidence from Europe," Research in International Business and Finance, Elsevier, vol. 42(C), pages 285-294.
    3. Rabah Amir & Michael Troege, 2011. "On the effects of banks’ equity ownership on credit markets," Annals of Finance, Springer, vol. 7(1), pages 31-52, February.
    4. Zorica Kalezić, 2015. "Ownership Concentration and Firm Performance in Transition Economies: Evidence from Montenegro," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 4(3), pages 5-64.

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    More about this item

    Keywords

    Financial institution ownership; Firm value; Capital structure;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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