CEIS Research Papers

Bank shareholding and lending: complementarity or substitution? Some evidence from a panel of large Italian firms!
Barucci Emilio and Mattesini Fabrizio
CEIS Research Paper

Published in Journal of Banking & Finance, Vol.32, n.10, 2008

The paper studies the motivations behind banks’ shareholding of non-financial firms using a panel of large Italian companies in the period 1994-2000. Empirical evidence shows that banks are shareholders of companies that are less profitable, have experienced slower growth, are more indebted and are endowed with collateral and have hard time to repay their debt out of current income. Banks are more likely to hold shares in companies they lend to. Overall the evidence suggests that there is complementarity between bank equity holding and lending. A plausible explanation is the shareholder-debtholder conflict, the evidence is weakly compatible with governance and information hypotheses.

Number: 118

Keywords: Lending, cross shareholding, conflict of interest

JEL-codes: G21, G24

Volume: 6

Issue: 5

Date: 14/07/2008