NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Universal Banking and the Performance of German Firms

Gary Gorton, Frank A. Schmid

NBER Working Paper No. 5453
Issued in February 1996
NBER Program(s):   CF

Universal banking is an alternative mechanism to a stock market for risk-sharing, for providing information for guiding investment, and for contesting corporate governance. In Germany, where the stock market has historically been small, banks hold equity stakes in firms and have proxy voting rights over other agents' shares. In addition, banks lend to firms and have representatives on corporate boards. If a banking relationship is a substitute for the stock market, then interaction with a bank should improve the performance of firms. But, if banks have private information about firms that they lend to and have monopolistic control over access to external capital markets, then bank interests may conflict with those of other equityholders, especially those whose shares are voted by the banks in proxy. We empirically investigate the influence of banks on the performance of German firms taking account of banks' equity holdings, the extent of banks' proxy voting rights, and the ownership structure of the firms' equity. We test for conflicts-of-interest in bank behavior and ask whether the relationship between banks and firms has changed between the 1970s and 1980s.

download in pdf format
   (1148 K)

email paper

This paper is available as PDF (1148 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w5453

Published: Gorton, Gary and Frank A. Schmid. "Universal Banking And The Performance Of German Firms," Journal of Financial Economics, 2000, v58(1-2,Jan), 29-80.

Users who downloaded this paper also downloaded these:
Cooper, Haltiwanger, and Power w5260 Machine Replacement and the Business Cycle: Lumps and Bumps
Kroszner and Rajan w5256 Organization Structure and Credibility: Evidence from Commercial Bank Securities Activities Before the Glass-Steagall Act
Calomiris The Costs of Rejecting Universal Banking: American Finance in the German Mirror, 1870-1914
Calomiris w4408 Corporate-Finance Benefits from Universal Banking: Germany and the United States, 1870-1914
Fohlin The History of Corporate Ownership and Control in Germany
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us