Bank Ownership, Firm Value and Firm Capital Structure in Europe

Lieven Baert and Rudi Vander Vennet

No 2.2, Working Paper / FINESS from DIW Berlin, German Institute for Economic Research

Abstract: We investigate whether or not banks play a positive role in the ownership structure of European listed firms. We distinguish between banks and other institutional investors as shareholders and examine empirically the relationship between financial institution ownership and the performance of the firms in which they hold equity. Our main finding is that after controlling for the capital structure decision of the firms and the ownership decision of financial institutions in a simultaneous equations model, we find that there is a negative relationship between financial institution ownership and the market value of firms, measured as the Tobin's Q. This is in contradiction with the monitoring hypothesis.

Keywords: Financial institution ownership; Firm value; Capital structure (search for similar items in EconPapers)
JEL-codes: G20 G32 (search for similar items in EconPapers)
Pages: 34 p.
Date: 2009
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Citations: View citations in EconPapers (5)

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