Preprint
Ownership Structure, Banks and Private Benefits of Control
SSRN Electronic Journal
2001
Abstract
What affects the number of banks a company chooses to borrow from? This paper provides evidence of a negative correlation across countries between shareholder protection and average number of banks used by firms, and proposes a simple explanation for this result. The intuition of the model is that setting up fewer bank relations induces the controlling shareholder to extract more private benefits of control because the banks share a larger fraction of the costs via the larger rent they earn. Since the opportunity to enjoy private benefits of control is larger in countries with lower shareholder protection, the model predicts more bank relationships (and higher ownership concentration) in those countries. Consistent with the model's predictions, in Italy the number of bank relations per firm increases with firm ownership concentration and with the size of the private benefits of control as measured by the voting premium
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Details
- Title
- Ownership Structure, Banks and Private Benefits of Control
- Creators
- Paolo F Volpin - Drexel University
- Publication Details
- SSRN Electronic Journal
- Publisher
- SSRN
- Resource Type
- Preprint
- Language
- German
- Academic Unit
- Finance
- Other Identifier
- 991021862404204721