Do Banks Influence the Capital Structure Choices of Firms?

Petra Daniševská, Abe de Jong and Marno Verbeek

ERIM Report Series Research in Management from Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam

Abstract: This paper investigates three capital structure decisions – leverage, debt maturity and the source of debt – in a simultaneous setting. Moreover, we investigate whether these choices are influenced by the involvement of banks in a firm. Our results based on a panel of Dutch firms show that bank relationships, measured by interlocking board memberships and equity ownership, have a significant impact on the relations among the three capital structure choices. First, less bank involvement strengthens the positive impact of leverage on maturity. This is consistent with the liquidity risk theory, because involved banks help firms to mitigate liquidity risk. Second, bank debt negatively effects leverage in firms with bank interlocks, while this relation is absent in firms without such bank involvement. This result suggests that banks maximize the value of their loans by reducing overall leverage. Third, we find a strong trade-off between bank debt and maturity, which is independent of the degree of bank involvement.

Keywords: bank relationships; capital structure; debt maturity; financial economics; international economics; source of debt (search for similar items in EconPapers)
JEL-codes: F30 G21 G3 G32 M M41 (search for similar items in EconPapers)
Date: 2004-06-23
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://repub.eur.nl/pub/1333/ERS%202004%20040%20F&A.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ems:eureri:1333

Access Statistics for this paper

More papers in ERIM Report Series Research in Management from Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam Contact information at EDIRC.
Bibliographic data for series maintained by RePub ( this e-mail address is bad, please contact ).