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A discussion of banks controlling major equity in large industrial companies
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| Submitted: Mon Jun 19 2006
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A discussion of banks controlling major equity in large industrial companies The question touches to two important and obviously interrelated issues, that of the need and form of corporate control and that of the role of the financial system in resource allocation. During the last two decades the Modigliani - Miller proposition which stated that there is no relationship between corporate capital structure and the real performance of firms, has been increasingly disputed as the importance and power of financial institutions is realised. In general, a distinction is drawn between "market" and "bank" oriented financial systems, which are thought to correspond to the financial arrangements of the US and UK on the one hand, and of Germany, Japan and to some extent France on the other. The former are said to rely much more on the equity and stock markets for company finance and corporate control with banks having relatively little...
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