637 - Capital Structure, Corporate Goverance, and Monetary Policy: Firm-Level Evidence for the Euro Area

Wetenschappelijke publicatie
Date 1 November 2000

This paper contributes to the empirical evidence on the credit channel of monetary policy in the euro area by providing firm level evidence on the relation between the impact of monetary policy on firm balance sheets and the corporate governance characteristics of the firms. A sample of half a million European firm-year observations, extending over the period 1990-1997, is analyzed. First, we present four alternative indicators of monetary policy for the 11 euro countries plus the UK. Secondly, we analyze the influence of governance structure on the monetary impact on firms’ balance sheets. The results indicate that private firms, which appear to be more dependent on bank debt for external funds, are more susceptible to monetary policy shocks than public firms – quoted and unquoted. Key words: Credit channel, Corporate governance JEL codes: E52, G32