Universal banking and the performance of German firms

We empirically investigate the influence of German universal banks on the p erformance of German firms. We take into account banks' control rights from equity ownership, banks' proxy-voting rights, and the concentration of con trol rights from equity ownership (which includes complex forms such as pyr amids, cross-shareholdings, and stocks with multiple votes). We also accoun t for voting restrictions and the German codetermination system (under whic h employees of large firms have control rights that are unrelated to equity ownership). We find that firm performance improves to the extent that equi ty control rights are concentrated. Moreover, bank control rights from equi ty ownership significantly improve firm performance beyond what nonbank blo ckholders can achieve. (C) 2000 Elsevier Science S.A. All rights reserved.