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Bank shareholding and lending: complementarity or substitution? Some evidence from a panel of large Italian firms!

Emilio Barucci and Fabrizio Mattesini ()
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Emilio Barucci: Politecnico di Milano

No 118, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: 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.

Keywords: Lending; cross shareholding; conflict of interest (search for similar items in EconPapers)
JEL-codes: G21 G24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban
Date: 2008-07-14, Revised 2008-07-14
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