We empirically investigate the influence of German universal banks on the performance of German firms. We take into account banks’ control rights from equity ownership, banks’ proxy-voting rights, and the concentration of control rights from equity ownership (which includes complex forms such as pyramids, cross-shareholdings, and stocks with multiple votes). We also account for voting restrictions and the German codetermination system (under which employees of large firms have control rights that are unrelated to equity ownership). We find that firm performance improves to the extent that equity control rights are concentrated. Moreover, bank control rights from equity ownership significantly improve firm performance beyond what nonbank blockholders can achieve.
Journal of Financial Economics – Elsevier
Published: Jan 1, 2000
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