Bank-firm Ownership Association Impact on Loan Provision in Iran

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Hosseini, Sepideh | 2018

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Type of Document: M.Sc. Thesis
Language: Farsi
Document No: 51941 (44)
University: Sharif University of Technology
Department: Management and Economics
Advisor(s): Madanizadeh, Ali; Mahmoudzadeh, Amineh
Abstract:
Related Lending is defined as banks making loans to firms with which they have some kind of ownership association. On one hand, this practice can help diminish asymmetric information between bank and firm which results in a more efficient allocation of bank’s resources. On the other hand, it may lead to the banks’ transferring resources to their related firms inefficiently, without meticulously assessing the risks involved. This paper is focused on the effect of the relationship between bank and firm in their ownership structure, on the loan provision. I have gathered a unique dataset of private and privatized banks and also private firms active in Iran’s stock market, which covers the period from 2011 to 2016. I have divided the bank-firm relationship into two groups: banks that are direct or indirect shareholders of a firm, and banks and firms that are connected via a common holding. At last, I conclude that it is more likely for banks to make a loan to their associated firms
Keywords:
Related Lending ; Asymmetric Information ; Corporate Governance ; Optimum Allocation