Large bank shareholders and terms of bank loans during the global financial crisis

Abstract

This paper analyzes the influence of large bank sharehold-ers on the terms of bank loans for a sample of 12,045 loansto 3,290 borrowers from 45 countries over the period 2004–2013. We investigate the effects of bank control over bankloan terms during the global financial crisis, regardless ofwhether the bank shareholder is a lender or not. In line witha monitoring effect, the results suggest that firms with bankshareholders that are non- lenders borrowed at lower inter-est rates and longer maturities during the period of crisis.However, borrowers paid higher spreads and were offeredshorter maturities when they borrowed from banks thatare also shareholders. This effect is consistent with banksobtaining private benefits as large shareholders as a con-sequence of the informational hold-up problems affectingborrowers.