Author : Caroline Fohlin
Publisher :
ISBN 13 :
Total Pages : 45 pages
Book Rating : 4.:/5 (129 download)
Book Synopsis Bank Relationships, Ownership Concentration, and Investment Patterns of Spanish Corporate Firms by : Caroline Fohlin
Download or read book Bank Relationships, Ownership Concentration, and Investment Patterns of Spanish Corporate Firms written by Caroline Fohlin and published by . This book was released on 2006 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: A firm's investment-cash flow sensitivity is often considered evidence of financial constraints, but such sensitivity may also stem from agency problems of free cash flows (managers overinvest). Close banking relationships are thought to ameliorate financing constraints and possibly agency problems, while ownership concentration mostly serves to prevent the latter. In Spain, a civil-law (French) system, where banks play a prominent role and where capital markets remain underdeveloped, these effects could be magnified. We find that bank relationships (via equity ownership or via debt) have little effect on firms' investment-cash flow sensitivity. In contrast, we find significantly lower cash-flow sensitivity among firms with high ownership concentration. The findings bolster the managerial overinvestment interpretation of cash-flow sensitivity and suggest that bank relationships provide imperfect substitutes for the oversight of large stakeholders.