Fiduciari and firm liquidity constraints: The Italian experience with German-style universal banking

This study presents new evidence on the influence of German-style relationship banking on investment patterns of Italian firms. Bank-affiliated firms were larger than independent firms but invested at lower rates. All firms, particularly newly public firms, demonstrate liquidity sensitivity of investment. Bank attachments apparently yielded no consistent amelioration of these effects. Further, the findings on performance offer little support for the idea that universal banks provide important screening services to investors. The results parallel the German experience and thus, formalized banking relationships appear to have made limited impact on firms' investments in the pre-World War I period. (C) 1998 Academic Press.