Was Mark Twain ahead of his time in finance? After all, he once said, “A banker is a fellow who lends you his umbrella when the sun is shining but wants it back the minute it begins to rain.” An owner, however, builds a roof instead. While financial theory suggests that a firm’s value remains the same whether financed with debt or equity, reality tells a different story—lenders bear most of the downside risk if a firm fails but don’t share in the upside when it succeeds. Perhaps that’s why bankers are often seen as dull gatekeepers limiting a firm’s growth, while bold owners like Elon Musk or Steve Jobs push boundaries to create value. But what happens when lenders and owners are one and the same?

A recent study[1] examines this dynamic by analysing mergers where creditors double as shareholders. As institutional investors increasingly hold both equity and debt in the same firms, the clash between risk-averse lenders and return-hungry shareholders is becoming harder to ignore. Mergers between lenders and shareholders should not only ease these conflicts but also empower such “dual holders” to demand greater transparency from the firms they own and lend to, since each group typically has access to different information. In addition to cutting through costly information asymmetry, dual holders should also be expected to step up oversight, making it tougher for management to sweep bad news under the rug.

By analysing 1,065 mergers between financial firms from 1996 and 2016, researchers identified 318 firms which ended up having significant institutional ownership and loans from 35 dual holders. These firms were compared with companies having a more standard ownership base (i.e. not dual holders) across metrics like leverage and profitability to see how the options market perceived their risk. The takeaway? The expected stock price crash risk—measured by implied volatility “smirks” that signal investor fears of a steep decline—declined by a whopping 22.8%, with the effect lasting three years. It seems dual holders do have a way of calming the market!

Indeed, findings show that dual holders curb managers’ incentives to conceal bad news, especially when institutional stakes are larger and shareholder-creditor conflicts run deeper. These mergers also drive greater bad news disclosure, particularly in firms with weaker controls. Overall, dual holdings ease shareholder-creditor tensions, strengthen oversight, and lower crash risk. Post-merger, firms are also more likely to issue earnings forecasts, especially when the news is negative. The effect is most significant in firms with high information asymmetry and governance gaps, underscoring the role of dual holders in strengthening accountability. Meanwhile, option investors see dual holders’ commitment to transparency as effective in reducing the potential of a stock price crash.

While motivations may vary between institutional shareholders and lenders, it seems that dual holders can lead to stricter monitoring, better management practices and lower risk. Or, as Gordon Gekko famously put it: “Greed, for lack of a better word, is good.