Do Universal Banks Create Value? Universal Bank Affiliation and Company Performance in Belgium, 1905-1909
43 Pages Posted: 8 Feb 2007
Date Written: December 2006
We investigate the impact of universal banks on the performance and the risk of affiliated companies in an unregulated environment with booming financial markets. For a unique sample of 129 Belgian companies listed in the period 1905-1909, we find that universal bank affiliation had a positive impact on the market-to-book ratio and return-on-assets. The effect on performance was positively related to the degree of bank involvement. Universal banks significantly reduced the volatility of return-on-assets. Stock return performance, measured by the Sharpe ratio, was also significantly better for affiliated corporations.
Keywords: Universal Banking, Company Performance, Company Risk, Director Interlocks
JEL Classification: G21, G24, G30, N23
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