Investment-Banking Relationships: 1933–2007

Alan D Morrison, Carola Schenone, Aaron Thegeya and William J WilhelmJr.

The Review of Corporate Finance Studies, 2018, vol. 7, issue 2, 194-244

Abstract: We study the evolution of investment-banking relationships from 1933 to 2007. Relationship exclusivity and client concerns for the state of their banking relationships were strong through the first part of our sample period but then entered a period of sharp decline beginning around 1970. We interpret the bank-client relationship as an informal governance mechanism for curbing opportunistic behavior in a weak contracting environment and examine how technological change aggravated conflicts of interest within investment banks and between banks and their clients. This perspective sheds light on why trust between banks and their clients now appears to be in short supply.Received March 2, 2018; editorial decision June 11, 2018 by Editor Paolo Fulghieri.

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:oup:rcorpf:v:7:y:2018:i:2:p:194-244.

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