DP497 Banks, Finance and Investment in West Germany since 1970

Author(s): Jeremy Edwards
Publication Date: January 1991
Keyword(s): Banking, Corporate Finance, Equity Voting Rights, Investment, West Germany
JEL(s): 312, 521
Programme Areas: Applied Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=497

The paper addresses the following questions. Does bank lending comprise a relatively large amount of finance for investment in Germany, and, if so, is this a consequence of bank representation on companies' supervisory boards (which, it is argued, reduces information asymmetries)? How strong is the degree of control of equity voting rights exerted by banks? To what extent does bank representation on supervisory boards constrain managements in such a way that internal efficiency is ensured? The analysis of this paper for in the period 1970-85 casts some doubt on the argument that German banks are an important factor in good German economic performance.