Bankers and the Performance of German Firms

Ernst Maug, Ingolf Dittmann and Christoph Schneider
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Ernst Maug: Chair for Corporate Finance, University of Mannheim and Sonderforschungsbereich 504, Postal: L9, 1-2, 68131 Mannheim
Christoph Schneider: Chair for Corporate Finance, University of Mannheim, Postal: L9, 1-2, 68131 Mannheim

No 07-40, Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim, Sonderforschungsbereich 504, University of Mannheim

Abstract: In this paper we analyze the impact of banks on German non-financial companies through ownership stakes and board representation. We find that the correlation between firm value and bank representation is negative and highly significant. By exploring the time series dimension of our dataset, we show that bank presence causes lower performance while there is no evidence of causality in the opposite direction. Our results suggest that bankers are attracted to the boards of those companies where they can extract larger benefits of control: Banks are systematically more represented on the boards of companies that are larger, have more intangible assets and offer higher board remuneration. There is little evidence that banks facilitate lending or monitor existing debt contracts. Whereas block ownership by non-banks is associated with better performance, there is no such relationship for banks.

Pages: 36 pages
Date: 2007-06-26
Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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Related works:
Working Paper: Bankers and the performance of German firms (2009)
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