Bank Debt and Corporate Governance

In this paper, we investigate the disciplining role of banksand bank debt in the market for corporate control. We find thatrelationship bank lending intensity and bank client networkhave positive effects on the probability of a borrowing firmbecoming a target. This effect is enhanced in cases where thetarget and acquirer have a relationship with the same bank.Moreover, we utilize an experiment to show that the effectsof relationship bank lending intensity on takeover probabilityare not driven by endogeneity. Finally, we also investigatereasons motivating a bank's informational role in the marketfor corporate control.