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Ownership structure, risk and performance in the European banking industry

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Author Info

  • Giuliano Iannotta

    (Universita Bocconi - Università Bocconi)

  • Giacomo Nocera

    ()
    (Audencia Recherche - Audencia)

  • Andrea Sironi

    (Universita Bocconi - Università Bocconi)

Registered author(s):

    Abstract

    We compare the performance and risk of a sample of 181 large banks from 15 European countries over the 1999-2004 period and evaluate the impact of alternative ownership models, together with the degree of ownership concentration, on their profitability, cost efficiency and risk. Three main results emerge. First, after controlling for bank characteristics, country and time effects, mutual banks and government-owned banks exhibit a lower profitability than privately owned banks, in spite of their lower costs. Second, public sector banks have poorer loan quality and higher insolvency risk than other types of banks while mutual banks have better loan quality and lower asset risk than both private and public sector banks. Finally, while ownership concentration does not significantly affect a bank's profitability, a higher ownership concentration is associated with better loan quality, lower asset risk and lower insolvency risk. These differences, along with differences in asset composition and funding mix, indicate a different financial intermediation model for the different ownership forms.

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    File URL: http://hal-audencia.archives-ouvertes.fr/docs/00/86/18/06/PDF/Iannotta_Nocera_Sironi_2007_JBF_PP.pdf
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    Bibliographic Info

    Paper provided by HAL in its series Post-Print with number hal-00861806.

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    Date of creation: 2007
    Date of revision:
    Publication status: Published, Journal of Banking and Finance, 2007, 31, 7, 2127-2149
    Handle: RePEc:hal:journl:hal-00861806

    Note: View the original document on HAL open archive server: http://hal-audencia.archives-ouvertes.fr/hal-00861806
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    Related research

    Keywords: European banking ; Ownership ; Governance ; Performance;

    References

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