Post by Sapphire Capital on Sept 18, 2008 4:40:14 GMT 4
Bankers on the Boards of German Firms: What They Do, What They are Worth, and Why They are (Still) There
Ingolf Dittmann
Erasmus University Rotterdam (EUR) - Erasmus School of Economics; Tinbergen Institute; Erasmus Research Institute of Management (ERIM) - Joint Research Institute of Rotterdam School of Management (RSM) and Erasmus School of Economics(ESE), EUR
Ernst G. Maug
University of Mannheim - Department of Business Administration and Finance; European Corporate Governance Institute (ECGI)
Christoph Schneider
University of Mannheim - Department of Business Administration and Finance
June 27, 2008
ECGI - Finance Working Paper No. 196/2008
Abstract:
We analyze the role of bankers on the boards of German non-financial companies. We assemble a panel data set for 137 firms and 11 banks for the period from 1994 to 2005. We find that banks that are represented on a firm's board promote their investment banking services and increase their lending to firms in the same industry. We also find evidence that the presence of bankers on the board causes a decline in the valuations of non-financial firms. We do not find convincing evidence for standard explanations that bankers use board seats to monitor their equity interests or their interests as lenders, or that bankers are capital market experts and help firms to overcome financial constraints. We conclude that board representation in non-financial firms is in the interest of banks, but not in the interest of the non-bank shareholders in these firms. Institutional changes and the sharp decline in banks' equity ownership characterize a development where the German financial system has lost some of its formerly distinctive features.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1153369_code244397.pdf?abstractid=1093899&mirid=3
Ingolf Dittmann
Erasmus University Rotterdam (EUR) - Erasmus School of Economics; Tinbergen Institute; Erasmus Research Institute of Management (ERIM) - Joint Research Institute of Rotterdam School of Management (RSM) and Erasmus School of Economics(ESE), EUR
Ernst G. Maug
University of Mannheim - Department of Business Administration and Finance; European Corporate Governance Institute (ECGI)
Christoph Schneider
University of Mannheim - Department of Business Administration and Finance
June 27, 2008
ECGI - Finance Working Paper No. 196/2008
Abstract:
We analyze the role of bankers on the boards of German non-financial companies. We assemble a panel data set for 137 firms and 11 banks for the period from 1994 to 2005. We find that banks that are represented on a firm's board promote their investment banking services and increase their lending to firms in the same industry. We also find evidence that the presence of bankers on the board causes a decline in the valuations of non-financial firms. We do not find convincing evidence for standard explanations that bankers use board seats to monitor their equity interests or their interests as lenders, or that bankers are capital market experts and help firms to overcome financial constraints. We conclude that board representation in non-financial firms is in the interest of banks, but not in the interest of the non-bank shareholders in these firms. Institutional changes and the sharp decline in banks' equity ownership characterize a development where the German financial system has lost some of its formerly distinctive features.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1153369_code244397.pdf?abstractid=1093899&mirid=3