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Does Bank Affiliation Mitigate Liquidity Constraints? Evidence from Germany's Universal Banks in the Pre‐World War I Period
Author(s) -
Becht Marco,
Ramírez Carlos D.
Publication year - 2003
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/j.2325-8012.2003.tb00569.x
Subject(s) - german , market liquidity , sample (material) , world war ii , period (music) , dual (grammatical number) , control (management) , economics , business , financial system , accounting , political science , monetary economics , law , management , history , archaeology , chromatography , art , chemistry , physics , literature , acoustics
This paper compares two similar samples of mining and steel corporations in pre‐World War I Germany: one sample consists of corporations that were affiliated to one or more of the German “Universal Banks”, and the second sample consists of companies that had to rely on other sources of finance. Statistical analysis conducted in the framework of a linear fixed effects model indicates that the non‐affiliated companies were liquidity constrained. The paper also sets out the corporate control structure as laid down in the trade law reform of 1884 and traces the origins of the current German dual board system, as well as the origins of several other aspects of the institutions that tied the German banking system to industrial concerns.