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Published August 11, 2017 | Draft + Accepted Version
Report Open

Corporate Capital Structure and the Influence of Universal Banks in Pre-War Germany

Abstract

Information asymmetries and conflicts of interest are theorized to inflate the cost of external finance, but formal bank relationships are thought to ameliorate such problems and may even lead to excessive leverage. Bank oversight is associated with slightly higher leverage but not with greater use of bank debt. Older and cash-rich firms have lower leverage and less bank debt, suggesting that information problems affected firms' financing decisions; but bank attachment appears not to alter these patterns. The findings suggest that bank oversight had little to do with leverage decisions, particularly short-term borrowing, in the later stages of the German industrialization.

Additional Information

Revised version. Original dated to May 1998 and titled "Bank Oversight and the Capital Structure of German Firms." My thanks go to David Soskice (Wissenschaftszentrum Berlin) and Martin Hellwig (University of Mannheim) for their kind hospitality during the drafting of this paper as well as to Thomas Gehrig, Matt Jackson, Larry Neal, John Latting, and conference participants at the 1998 Cliometric Society meetings for helpful comments and discussions. Financial support from the National Science Foundation and the Fulbright Commission is gratefully acknowledged. Published as Fohlin, C. (2002). Corporate capital structure and the influence of universal banks in pre-world war I Germany. Jahrbuch für Wirtschaftsgeschichte/Economic History Yearbook, 43(2), 113-134.

Attached Files

Accepted Version - sswp1030_-_revised.pdf

Draft - sswp1030.pdf

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Created:
August 19, 2023
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