The value of bank relationships: Evidence from Belgium at the start of the Great Depression



This study analyzes the impact of bank affiliations on the performance of large Belgian firms in 1929-1931, when most of these firms were affiliated with one or more banks via interlocking directorships. A majority of the firms had interlocking directorships with the two dominant Belgian banks: the Société Générale de Belgique and the Banque de Bruxelles. Using different methodologies, we find that bank affiliations did not affect financial performance and dividend policy, which suggests that these affiliations were not helpful (or harmful) to Belgian firms at the start of the Great Depression. Firms with multiple bank affiliations had a lower market-to-book ratio in 1929 and 1930, which indicates free rider problems between affiliated banks.
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The Business History Seminar has been made possible by financial support from the Erasmus Research Institute of Management (ERIM) and the Vereniging Trustfonds Erasmus Universiteit Rotterdam.
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Abe de Jong Ben Wubs
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