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Universal banks and corporate control: evidence from the global syndicated loan market

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  • Ferreira, Miguel A.
  • Matos, Pedro

Abstract

Banks play a role in the corporate governance of firms as well as acting as debt financiers around the world. Universal banks can have control over borrowing firms by representation on the board of directors or by holding shares through direct stakes or institutional holdings. We investigate the effects of these bank-firm governance links on the global syndicated loan market. We find that banks are more likely to act as lead arrangers, charge higher interest rate spreads and face less credit risk after origination when they have some role in firm's governance. This increase in interest rate spread is less pronounced for borrowers with access to international capital markets. Our results are robust to several methods to correct for the endogeneity of the bank-firm governance link. Our findings suggest that the benefits of bank involvement in firms' governance accrue mostly to the banks. JEL Classification: G32, G21

Suggested Citation

  • Ferreira, Miguel A. & Matos, Pedro, 2009. "Universal banks and corporate control: evidence from the global syndicated loan market," Working Paper Series 1066, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20091066
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    More about this item

    Keywords

    corporate boards; ownership; syndicated loans; universal banking;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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