Arbeitspapier
Banks' equity stakes in borrowing firms: A corporate finance approach
In most countries, banks' equity holdings in firms that borrow from then are rather small.In light of the theoretical literature, this is somewhat surprising.For example, according to agency cost models, allowing banks to hold equity would seem to alleviate firms' asset substitution moral hazard problem associated with debt financing.This idea is formalised in John, John, and Saunders in a model where banks are modeled as passive investors and bank loans are the only source of outside finance for firms.In this paper, we argue that this alleged benefit of banks' equity holding is small or non-existent when banks are modeled explicitly as active monitors and firms have access also to market finance.
- ISBN
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952-462-059-6
- Language
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Englisch
- Bibliographic citation
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Series: Bank of Finland Discussion Papers ; No. 13/2003
- Classification
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Wirtschaft
Asymmetric and Private Information; Mechanism Design
Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- Subject
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banks' equity holdings
firms' capital structure
social welfare
- Event
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Geistige Schöpfung
- (who)
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Vauhkonen, Jukka
- Event
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Veröffentlichung
- (who)
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Bank of Finland
- (where)
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Helsinki
- (when)
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2003
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
This object is provided by:
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Vauhkonen, Jukka
- Bank of Finland
Time of origin
- 2003
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