Too Dispersed to Monitor? Ownership Dispersion, Monitoring, and the Prediction of Bank Distress
AbstractThis paper conducts an empirical assessment of the theories stating that ownership concentration improves the quality of shareholders' monitoring. In contrast with other studies, we do not use regressions of risk/performance on ownership concentration. Instead, we build an early warning model of bank distress that includes a leading indicator derived from banks' share price, the Merton-KMV distance to default (DD). The significance of this indicator depends on the efficacy of shareholders' monitoring. On a sample of European banks, we show that the predictive power of the DD is satisfactory only when banks' shareholding is characterized by the presence of blockholders.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 44 (2012)
Issue (Month): 4 (06)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
Other versions of this item:
- Tristan Auvray & Olivier Brossard, 2010. "Too dispersed to monitor? Ownership dispersion, monitoring and the prediction of bank distress," Working Papers hal-00638913, HAL.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Männasoo, Kadri & Mayes, David G., 2009. "Explaining bank distress in Eastern European transition economies," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 244-253, February.
- Park, Sangkyun & Peristiani, Stavros, 2007.
"Are bank shareholders enemies of regulators or a potential source of market discipline?,"
Journal of Banking & Finance,
Elsevier, vol. 31(8), pages 2493-2515, August.
- Sangkyun Park & Stavros Peristiani, 2001. "Are bank shareholders enemies of regulators or a potential source of market discipline?," Staff Reports 138, Federal Reserve Bank of New York.
- Gropp, Reint & Vesala, Jukka & Vulpes, Giuseppe, 2002.
"Equity and bond market signals as leading indicators of bank fragility,"
Working Paper Series
0150, European Central Bank.
- Reint Gropp & Jukka Vesala & Giuseppe Vulpes, 2002. "Equity and bond market signals as leading indicators of bank fragility," Conference Series ; [Proceedings], Federal Reserve Bank of Boston.
- Gropp, Reint & Vesala, Jukka & Vulpes, Giuseppe, 2006. "Equity and Bond Market Signals as Leading Indicators of Bank Fragility," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(2), pages 399-428, March.
- Burkart, Mike & Gromb, Denis & Panunzi, Fausto, 1997. "Large Shareholders, Monitoring, and the Value of the Firm," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 693-728, August.
- Thierno Amadou Barry & Laetitia Lepetit & Amine Tarazi, 2011.
"Ownership structure and risk in publicly held and privately owned Banks,"
- Barry, Thierno Amadou & Lepetit, Laetitia & Tarazi, Amine, 2011. "Ownership structure and risk in publicly held and privately owned banks," Journal of Banking & Finance, Elsevier, vol. 35(5), pages 1327-1340, May.
- Shleifer, Andrei & Vishny, Robert W., 1986.
"Large Shareholders and Corporate Control,"
3606237, Harvard University Department of Economics.
- Sanford J. Grossman & Oliver D. Hart, 1980. "Takeover Bids, the Free-Rider Problem, and the Theory of the Corporation," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 42-64, Spring.
- Faccio, Mara & Lang, Larry H. P., 2002. "The ultimate ownership of Western European corporations," Journal of Financial Economics, Elsevier, vol. 65(3), pages 365-395, September.
- Sullivan, Richard J. & Spong, Kenneth R., 2007. "Manager wealth concentration, ownership structure, and risk in commercial banks," Journal of Financial Intermediation, Elsevier, vol. 16(2), pages 229-248, April.
- Curry, Timothy J. & Elmer, Peter J. & Fissel, Gary S., 2007. "Equity market data, bank failures and market efficiency," Journal of Economics and Business, Elsevier, vol. 59(6), pages 536-559.
- Marco Becht & Fabrizio Barca, 2001. "The control of corporate Europe," ULB Institutional Repository 2013/13302, ULB -- Universite Libre de Bruxelles.
- Isabelle Distinguin & Philippe Rous & Amine Tarazi, 2006. "Market Discipline and the Use of Stock Market Data to Predict Bank Financial Distress," Journal of Financial Services Research, Springer, vol. 30(2), pages 151-176, October.
- Sironi, Andrea, 2003.
" Testing for Market Discipline in the European Banking Industry: Evidence from Subordinated Debt Issues,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 35(3), pages 443-72, June.
- Andrea Sironi, 2000. "Testing for market discipline in the European banking industry: evidence from subordinated debt issues," Finance and Economics Discussion Series 2000-40, Board of Governors of the Federal Reserve System (U.S.).
- Giuliano Iannotta & Giacomo Nocera & Andrea Sironi, 2007. "Ownership structure, risk and performance in the European banking industry," Post-Print hal-00861806, HAL.
- Ederington, Louis H. & Goh, Jeremy C., 1998. "Bond Rating Agencies and Stock Analysts: Who Knows What When?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(04), pages 569-585, December.
- Charles Kahn & Andrew Winton, 1998. "Ownership Structure, Speculation, and Shareholder Intervention," Journal of Finance, American Finance Association, vol. 53(1), pages 99-129, 02.
- Iannotta, Giuliano & Nocera, Giacomo & Sironi, Andrea, 2007. "Ownership structure, risk and performance in the European banking industry," Journal of Banking & Finance, Elsevier, vol. 31(7), pages 2127-2149, July.
- Krainer, John & Lopez, Jose A, 2004. "Incorporating Equity Market Information into Supervisory Monitoring Models," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(6), pages 1043-67, December.
- Olivier Brossard & Stéphanie Lavigne & Mustafa Erdem Sakinc, 2013. "Ownership structures and R&D in Europe: the good institutional investors, the bad and ugly impatient shareholders," Post-Print halshs-00843984, HAL.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.