Do universal banks create value? Universal bank affiliation and company performance in Belgium, 1905–1909

We investigate the impact of universal bank relations on the performance and the risk of listed companies in Belgium in the period 1905–1909. Our results are consistent with the view that universal banks are efficient institutions which overcome problems of asymmetric association inevitably associated with external finance. We find that universal bank affiliation was positively linked with market-to-book ratio and return-on-assets. Performance was also positively related to the degree of bank involvement. Universal bank relations were significant and negatively correlated with volatility of return-on-assets. Finally, stock return performance, measured by the Sharpe ratio, was also significantly better for affiliated corporations.