Bank connections, corporate investment and crisis

Susanne Espenlaub, Arif Khurshed, Thitima Sitthipongpanich

Research output: Contribution to journalArticle

10 Citations (Scopus)

Abstract

Against the backdrop of a severe financial crisis and extensive restructuring of the financial sector, we investigate the evolution and determinants of connections between firms and banks, and the impact of bank connections on corporate investment. Our study examines Thai non-financial companies during 1995-2000, a period straddling the East Asian Financial Crisis of 1997-1998. Before the crisis, bank-connections are common and associated with significantly lower sensitivity of corporate investment to internal cash flow. After the crisis, and following substantial changes in bank ownership and governance due to financial-sector reforms and restructuring, far fewer firms are bank-connected and connections no longer affect investment-cash flow sensitivity.

LanguageEnglish
Pages1336-1353
Number of pages18
JournalJournal of Banking and Finance
Volume36
Issue number5
Early online date13 Dec 2011
DOIs
Publication statusPublished - May 2012
Externally publishedYes

Fingerprint

Corporate investment
Financial sector
Cash flow
Bank crises
Investment-cash flow sensitivity
Asian financial crisis
Governance
Financial crisis
Bank ownership

Cite this

Espenlaub, Susanne ; Khurshed, Arif ; Sitthipongpanich, Thitima. / Bank connections, corporate investment and crisis. In: Journal of Banking and Finance. 2012 ; Vol. 36, No. 5. pp. 1336-1353.
@article{5e03cabe223b4f7a9d307106f45ce741,
title = "Bank connections, corporate investment and crisis",
abstract = "Against the backdrop of a severe financial crisis and extensive restructuring of the financial sector, we investigate the evolution and determinants of connections between firms and banks, and the impact of bank connections on corporate investment. Our study examines Thai non-financial companies during 1995-2000, a period straddling the East Asian Financial Crisis of 1997-1998. Before the crisis, bank-connections are common and associated with significantly lower sensitivity of corporate investment to internal cash flow. After the crisis, and following substantial changes in bank ownership and governance due to financial-sector reforms and restructuring, far fewer firms are bank-connected and connections no longer affect investment-cash flow sensitivity.",
keywords = "Bank connections, Family firms, Financial crisis, Investment-cash flow sensitivity",
author = "Susanne Espenlaub and Arif Khurshed and Thitima Sitthipongpanich",
year = "2012",
month = "5",
doi = "10.1016/j.jbankfin.2011.11.024",
language = "English",
volume = "36",
pages = "1336--1353",
journal = "Journal of Banking and Finance",
issn = "0378-4266",
publisher = "Elsevier",
number = "5",

}

Bank connections, corporate investment and crisis. / Espenlaub, Susanne; Khurshed, Arif; Sitthipongpanich, Thitima.

In: Journal of Banking and Finance, Vol. 36, No. 5, 05.2012, p. 1336-1353.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Bank connections, corporate investment and crisis

AU - Espenlaub, Susanne

AU - Khurshed, Arif

AU - Sitthipongpanich, Thitima

PY - 2012/5

Y1 - 2012/5

N2 - Against the backdrop of a severe financial crisis and extensive restructuring of the financial sector, we investigate the evolution and determinants of connections between firms and banks, and the impact of bank connections on corporate investment. Our study examines Thai non-financial companies during 1995-2000, a period straddling the East Asian Financial Crisis of 1997-1998. Before the crisis, bank-connections are common and associated with significantly lower sensitivity of corporate investment to internal cash flow. After the crisis, and following substantial changes in bank ownership and governance due to financial-sector reforms and restructuring, far fewer firms are bank-connected and connections no longer affect investment-cash flow sensitivity.

AB - Against the backdrop of a severe financial crisis and extensive restructuring of the financial sector, we investigate the evolution and determinants of connections between firms and banks, and the impact of bank connections on corporate investment. Our study examines Thai non-financial companies during 1995-2000, a period straddling the East Asian Financial Crisis of 1997-1998. Before the crisis, bank-connections are common and associated with significantly lower sensitivity of corporate investment to internal cash flow. After the crisis, and following substantial changes in bank ownership and governance due to financial-sector reforms and restructuring, far fewer firms are bank-connected and connections no longer affect investment-cash flow sensitivity.

KW - Bank connections

KW - Family firms

KW - Financial crisis

KW - Investment-cash flow sensitivity

UR - http://www.scopus.com/inward/record.url?scp=84858276527&partnerID=8YFLogxK

U2 - 10.1016/j.jbankfin.2011.11.024

DO - 10.1016/j.jbankfin.2011.11.024

M3 - Article

VL - 36

SP - 1336

EP - 1353

JO - Journal of Banking and Finance

T2 - Journal of Banking and Finance

JF - Journal of Banking and Finance

SN - 0378-4266

IS - 5

ER -