Banks as a Firm`s Blockholders. a Study for Spain

This paper analyzes how a firm’s returns and the stake of the controlling blockholders are affected when a bank becomes a blockholder with one of the largest stakes. Compared to previous studies, we approach this issue by taking into consideration the type of blockholders building up coalitions with banks in order to control a firm. This allows us to reconcile different results, reported in relevant literature, on the impact of banks’ ownership of a firm on its returns. In short, we argue that this latter effect is negative only when a bank buys the largest stake or when it forms coalitions with other banks to control a firm. However, this does not apply when a bank buys the second largest stake of a firm with a non-bank as the largest blockholder. We prove empirically our theoretical contentions making use of a sample of Spanish firms for the period 1996-2000.