DOES RELATIONSHIP BANKING CREATE VALUE? THE ROLE OF UNIVERSAL BANKS IN BELGIUM AT THE BEGINNING OF THE 20TH CENTURY-VERY PRELIMINARY AND INCOMPLETE VERSION –

This paper examines the impact of universal banks on the performance of affiliated firms in Belgium during the period 1905-1909. Performance is measured by the return-on-assets and the market-to-book ratio. Affiliated companies are defined through direct equity stakes and interlocking directorates. We pay special attention to the Société Générale de Belgique, which was the dominant universal bank in Belgium. We find that affiliation with the Société Générale had a significant positive impact during and after the 1907 crisis for firms in which the Société Générale had a significant equity stake and for firms in which more than one executive board member of the Société Générale was present. On the other hand, for firms in which the Société Générale was present with one executive board member, we find a significantly negative impact. Finally, our results suggest that affiliation with other universal banks is mostly insignificant, even though the impact seems to be larger if a company has more bank directors on its board.-2