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Insider ownership, power, and bank value

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  • Jijun Niu

    (Beedie School of Business, Simon Fraser University.)

Abstract

This paper examines the influence of insider ownership and power on bank value. We measure insider ownership as the fraction of the bank’s common stock owned by its directors and officers as a group, and insider power using the Milnor and Shapley (1978) power index for oceanic voting games. Using a sample of U.S. banks, we find that insider ownership is positively related to bank value, while insider power is negatively related to bank value. These results are consistent with the agency theory literature. To the extent that regulators want to increase bank value, they should encourage equity ownership by bank insiders and outside blockholders.

Suggested Citation

  • Jijun Niu, 2016. "Insider ownership, power, and bank value," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 4(4), pages 34-41, August.
    • Handle: RePEc:lrc:lareco:v:4:y:2016:i:4:p:34-41
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    References listed on IDEAS

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    More about this item

    Keywords

    bank; Insider ownership; Insider power; Value.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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