Firm Performance, Financial Institutions and Corporate Governance in the Netherlands

Garretsen, Harry; Chirinko, Robert S.; van Ees, Hans; Sterken, Elmer

doi:10.2139/ssrn.272588

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Firm Performance, Financial Institutions and Corporate Governance in the Netherlands

CESifo Working Paper Series No. 210

28 Pages Posted: 17 Jun 2001

See all articles by Harry Garretsen

Harry Garretsen

Utrecht University - School of Economics; CESifo (Center for Economic Studies and Ifo Institute); Radboud University Nijmegen - Department of Economics

Robert S. Chirinko

CESifo (Center for Economic Studies and Ifo Institute); University of Illinois at Chicago, Department of Finance

Elmer Sterken

University of Groningen - Faculty of Economics and Business; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: November 1999

Abstract

This paper analyses the impact of share ownership, creditorship and networking by financial institutions on the performance of 94 Dutch non-financial firms in the period 1992-1996. We find a nonlinear relationship between firm performance and ownership by banks. Because of various defense mechanisms the role of the shareholder is very limited in the Netherlands. Financial institutions are, however, in a position to discipline firm management through other channels. It turns out that there is a direct positive link between share ownership by banks and the firms` short-term bank loans, which indicates the existence of a financing channel. Financial institutions are also represented on the supervisory boards of firms and vice versa, which is an example of networking. This suggests that besides creditorship networking may be an additional disciplinary device for financial institutions. Here we find that there is a significant positive relationship between share ownership by insurance companies and pension funds and the probability of networking.

JEL Classification: G2, G3

Suggested Citation: Suggested Citation

Garretsen, Harry and Chirinko, Robert S. and Chirinko, Robert S. and van Ees, Hans and Sterken, Elmer, Firm Performance, Financial Institutions and Corporate Governance in the Netherlands (November 1999). CESifo Working Paper Series No. 210, Available at SSRN: https://ssrn.com/abstract=272588 or http://dx.doi.org/10.2139/ssrn.272588