Bank ownership, lending relationships and capital structure: Evidence from Spain (2019) by Carlos Fernández-Méndez and Victor M.González
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Financial institutions control 35% of firms in Belgium, 30% in Sweden, 25% in Finland and Germany, 20% in Portugal, 15% in Spain and 10% in Argentina and Norway.
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Shareholders prefer to assume higher risk than lenders, whereas lenders prefer firms to maximize the probability of repayment.
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Hypothesis:
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H1a: Banks stock ownership has a positive influence on debt and debt maturity and a negative effect on debt cost if the monitoring effect is prevalent. -
H1b: Banks stock ownership has a negative influence on debt and debt maturity and a positive effect on debt cost if the expropriation effect is prevalent.
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Result:
- Debt maturity increases with bank ownership, whereas the cost of debt decreases with bank ownership.These results are consistent with the predominance of the monitoring effect over the expropriation effect.