Universal Banking, Conflicts of Interest and Firm Growth.

This paper studies the relationship between universal banking and firm performance. With 40 developing and developed countries, I find that the overall effect of universal banking on firm growth is negative. This suggests that the negative effect of conflicts of interest dominates the positive effect of economies of scale and scope in universal banking. However, in countries with stronger protection of creditors' rights and higher information effciency, conflicts of interest are less likely and the negative relationship between universal banking and firm growth is significantly weaker.Universal Banking, Firm Incentive, Con°icts of Interest, Economies of Scope, Economies of Scale