Cross Ownership, Loan Commitment, Managerial Delegation and the “Prisoner’s Dilemma”

Ma, Jie and Wang, Leonard F.S. and Sun, Ji (2022): Cross Ownership, Loan Commitment, Managerial Delegation and the “Prisoner’s Dilemma”.

Abstract

This paper investigates the relationship between cross ownership, sales delegation and loan commitment. We find that under sales delegation, a higher degree of cross ownership decreases the optimal bank loan interest rate, which is beneficial to the firm profits. However, cross ownership reduces the firm output, leading a lower consumer surplus and social welfare. The policy implication is that antitrust authority and banking regulatory bureau should “coordinate” policies to mitigate the concerned stakeholders’ conflicts.

• Item Type: MPRA Paper
• Language: English
• Keywords: Cross ownership; Sales delegation; Loan commitment
• Subjects: G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill; G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers ; Acquisitions ; Restructuring ; Corporate Governance; J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining > J53 - Labor-Management Relations ; Industrial Jurisprudence; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L21 - Business Objectives of the Firm

References

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