Universal Banks and Corporate Control: Evidence from the Global Syndicated Loan Market

• DOI: 10.1093/rfs/hhs076
• Publication Date: 2012-08-17T06:00:42Z
• Authors: Miguel A. Ferreira; Pedro Matos
• Keywords: Endogeneity

We investigate the effects of bank control over borrower firms whether by representation on boards directors or holding shares through asset management divisions. Using a large sample syndicated loans, we find that banks are more likely to act as lead arrangers in loans when they exert some firm. Bank-firm governance links associated with higher loan spreads during 2003–2006 credit boom but lower 2007–2008 financial crisis. Additionally, these mitigate rationing The results robust several methods correct for endogeneity bank-firm link. Our evidence, consistent intertemporal smoothing rates, suggests there costs and benefits from banks' involvement firm governance.