Research

Bank-affiliated venture capitalists (BVCs) play an important role, especially outside main entrepreneurial hubs. Banks act as anchors to the companies, serving as a positive signal of their quality and attracting further investors. Due to their abilities in monitoring and higher local expertise, banks are able to select profitable VC investments, add value, and exit them successfully. I exploit the implementation of the Volcker Rule as a shock where banks are no longer allowed to sponsor or invest in VC funds. I find that companies in regions dependent on bank VC financing suffer a drop in financing and innovation. A proxy for attention to start-ups serves as another confirmation mechanism of our story. I add to the debate on cross-selling services by financial intermediaries and on the certification role that banks play in markets other than lending.

*Scheduled presentations.

I examine the relation between bank venture capital investments and subsequent M&A advisory services. The literature suggests that banks are strategic investors seeking complementarities between their different divisions. I find evidence that banks use venture capital investments as a way to build future M&A advisory relationships. I show that there is a 30% increase in the probability of being an M&A advisor conditional on investing in a company in the VC market. I find that banks make investments in sectors which have relatively high debt levels, possibly due to inter-temporal cross-selling opportunities. In line with prior literature, I show that banks benefit from relationships built at the VC stage through higher fees charged to the target companies in the subsequent M&A transaction, consistent with a certification role that the bank plays. This paper adds to the debate on the benefits and drawbacks of bank’s cross-selling activities and universal banking.

We use confidential data from a large commercial bank to examine the implementation of an unexpected tax on bank assets. We look into the effects of the legislation on new commitments to SMEs both at the extensive and intensive margin. We check multiple dimensions characterising the bank’s reaction: decrease in new lending, increase in pricing and strengthening of collateral and monitoring requirements.