Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- Preface
- 1 Introduction
- 2 A theoretical framework for analysing the effects of the financial system on economic performance
- 3 The significance of bank loans in the finance of aggregate investment in Germany
- 4 Legal forms of enterprise in Germany, and their implications for the role of the German financial system
- 5 The structure of the German banking system
- 6 Bank supervisory board representation and other aspects of German bank lending to firms
- 7 German bank behaviour when firms are in financial distress
- 8 The ownership structure of large German firms, and its implications for German banks' corporate control role
- 9 Do German banks act as delegated exercisers of equity's control rights?
- 10 Conclusion
- Bibliography
- Index
6 - Bank supervisory board representation and other aspects of German bank lending to firms
Published online by Cambridge University Press: 02 November 2009
- Frontmatter
- Contents
- List of figures
- List of tables
- Preface
- 1 Introduction
- 2 A theoretical framework for analysing the effects of the financial system on economic performance
- 3 The significance of bank loans in the finance of aggregate investment in Germany
- 4 Legal forms of enterprise in Germany, and their implications for the role of the German financial system
- 5 The structure of the German banking system
- 6 Bank supervisory board representation and other aspects of German bank lending to firms
- 7 German bank behaviour when firms are in financial distress
- 8 The ownership structure of large German firms, and its implications for German banks' corporate control role
- 9 Do German banks act as delegated exercisers of equity's control rights?
- 10 Conclusion
- Bibliography
- Index
Summary
Introduction
This chapter extends the analysis of bank lending to firms begun in chapter 5. In that chapter it was shown that German bank lending to firms was not concentrated in the hands of the three big banks, while bank control of equity voting rights and bank representation on company supervisory boards was. This contrast raises some questions about the hypothesis that a system of investment finance characterised by universal banks with representation on supervisory boards is efficient because it exploits economies of scale and scope in information-collection and in the exercise of control rights attached to debt and equity finance. However, the bank lending data presented in chapter 5 was for loans to all German firms, while only AGs and large GmbHs are required to have supervisory boards. It is therefore possible that, although bank lending to all German firms is not concentrated, bank lending to those firms which have supervisory boards is concentrated among particular banks in a way which reflects the concentration of bank supervisory board representation. In order to evaluate the hypothesis that there are significant economies of scale and scope in information-gathering and the exercise of control rights, it is necessary to examine whether a relatively small number of universal banks have a dominant position in bank lending to German firms with supervisory boards as well as in bank representation on supervisory boards. If bank supervisory board representation reduces information asymmetries, there should also be evidence that bank lending is a more important source of finance for those German firms which have supervisory boards than for those which do not.
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- Banks, Finance and Investment in Germany , pp. 124 - 155Publisher: Cambridge University PressPrint publication year: 1994
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