Agency conflicts in French SMEs: are banks shareholders still influent

Abstract

The aim of our paper is to study the importance of the bank's role in corporate governance. For this purpose, we investigate motivations behind banks' shareholding of French SMEs and their impact on firm performance. A sample of 108 SMEs listed on the French mid and small stock market over the period 2008-2014 is empirically tested using Tobit and GLS methods. Estimation results suggest that bank equity-holding seems to play a role in the resolution of type I and type II agency conflicts. Similarly, we show that there is a concave nonlinear relationship between SME performance and bank ownership.