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<p>We examine the effects of bank ownership on debt ratio while considering the interplay of bank ownership with other types of institutional ownership. Our inferences are based on a large sample of 4575 firm-year observations from 980 firms across France, Germany, and the United Kingdom over the 2002–2018 period. We find that bank ownership reduces debt ratio, consistent with the bank monitoring theory. Further tests indicate that this effect is causal. The negative impact of bank ownership on debt ratio increases in the presence of other institutional investors, suggesting that bank monitoring is most effective when agency costs at the shareholder level are high. These findings support the view that bank ownership can mitigate agency conflicts not only between managers and investors but also at the shareholder level. Additional tests reveal that banks’ monitoring intensity is strongest in bank-based financial systems and during the post-global financial crisis period.</p>

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Bank monitoring, agency costs, and corporate financing decisions: European evidence

  • 期刊论文

  • 发表日期：

    2025年2月24日

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  • Gabriel Frahm,
  • Christian Glöer,
  • André Küster Simic,
  • Marwin Mönkemeyer

摘要

We examine the effects of bank ownership on debt ratio while considering the interplay of bank ownership with other types of institutional ownership. Our inferences are based on a large sample of 4575 firm-year observations from 980 firms across France, Germany, and the United Kingdom over the 2002–2018 period. We find that bank ownership reduces debt ratio, consistent with the bank monitoring theory. Further tests indicate that this effect is causal. The negative impact of bank ownership on debt ratio increases in the presence of other institutional investors, suggesting that bank monitoring is most effective when agency costs at the shareholder level are high. These findings support the view that bank ownership can mitigate agency conflicts not only between managers and investors but also at the shareholder level. Additional tests reveal that banks’ monitoring intensity is strongest in bank-based financial systems and during the post-global financial crisis period.