Close relationships between banks and firms: is it good or bad?

Vittoria Cerasi and Sonja Daltung

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper investigates the issues involved in cross-ownership between banks and firms. The idea is that congruity among the parties in control of the bank and the firm allows to save on monitoring costs, but it gives rise to a conflict of interest between on one hand the parties in control of the bank and on the other hand the outside investors, as for example depositors, of the bank. Nevertheless, the paper shows that there are benefits from cross-ownership, whenever the bank involved in the relationship is debt financed and well diversified.

JEL-codes: G21 G28 G32 (search for similar items in EconPapers)
Pages: 23 pages
Date: 1998-06-01
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:119145

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