We analyse the role of bank ownership and lending on capital structure for Spanish firms.

What is it about?

This paper analyses the influence of bank ownership and lending on capital structure for a sample of listed and unlisted Spanish firms in the period 2005---2012. The results suggest that bank ownership allows banks to obtain better information and reduce the agency costs ofdebt, as it has a positive relationship with the maturity of debt and a negative relationship withthe cost of debt. These results are consistent with the predominance of the monitoring effec tin bank ownership over the expropriation effect. The role of banks as shareholders and lendersalso contributes to reduce agency cost of debt, as it reduces debt cost.

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Photo by Etienne Martin on Unsplash

Photo by Etienne Martin on Unsplash

Why is it important?

Our study contributes to the debate on the governance effects of large shareholders tackling the controversial topicof their monitoring role or conversely their interest conflicts with the small shareholders that leads to the existence of the type-II agency problem. This debate is still opened and so far there is not a consensus about the role played by large shareholders. Moreover, when the large shareholders considered are banks there are serious doubts about their beneficial role for small shareholders given the specific interests derived from their dual role as equity and debt holders.

Perspectives