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Solidarity with Israel The Alliance of Science Organisations in Germany stands in solidarity with Israel. ...
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Reports of the European Forecasting Network (EFN)
Reports of the European Forecasting Network (EFN) The European Forecasting...
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IWH FDI Micro Database
IWH FDI Micro Database The IWH FDI Micro Database (FDI = Foreign Direct...
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Behaviour
The maths behind gut decisions First carefully weigh up the costs and benefits and then make a rational...
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Research Clusters
Three Research Clusters ...
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Centre for Evidence-based Policy Advice
Centre for Evidence-based Policy Advice (IWH-CEP) ...
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Corporate Governance Benefits of Mutual Fund Cooperation
Rex Wang Renji, Patrick Verwijmeren, Shuo Xia
IWH Discussion Papers,
No. 21,
2022
Abstract
Mutual fund families increasingly hold bonds and stocks from the same firm. We study the implications of such dual holdings for corporate governance and firm decision-making. We present evidence that dual ownership allows financially distressed firms to increase investments and to refinance by issuing bonds with lower yields and fewer restrictive covenants. As such, dual ownership reduces shareholder-creditor conflicts, especially when families encourage cooperation among their managers. Overall, our results suggest that mutual fund families internalize the shareholder-creditor agency conflicts of their portfolio companies, highlighting the positive governance externalities of intra-family cooperation.
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The Real Effects of Universal Banking: Does Access to the Public Debt Market Matter?
Stefano Colonnello
Journal of Financial Services Research,
February
2022
Abstract
I analyze the impact of the formation of universal banks on corporate investment by looking at the gradual dismantling of the Glass-Steagall Act’s separation between commercial and investment banking. Using a sample of US firms and their relationship banks, I show that firms curtail debt issuance and investment after positive shocks to the underwriting capacity of their main bank. This result is driven by unrated firms and is strongest immediately after a shock. These findings suggest that universal banks may pay more attention to large firms providing more underwriting opportunities while exacerbating financial constraints of opaque firms, in line with a shift to a banking model based on transactional lending.
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