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Ownership Structure and Risk in Publicly Held and Privately Owned Banks

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  • Thierno Amadou Barry

    ()
    (LAPE - Laboratoire d'Analyse et de Prospective Economique - Université de Limoges : EA1088 - Institut Sciences de l'Homme et de la Société)

  • Laetitia Lepetit

    ()
    (LAPE - Laboratoire d'Analyse et de Prospective Economique - Université de Limoges : EA1088 - Institut Sciences de l'Homme et de la Société)

  • Amine Tarazi

    ()
    (LAPE - Laboratoire d'Analyse et de Prospective Economique - Université de Limoges : EA1088 - Institut Sciences de l'Homme et de la Société)

Abstract

Using detailed ownership data for a sample of European commercial banks, we analyze the link between ownership structure and risk in both privately owned and publicly held banks. We consider five categories of shareholders (managers/directors, institutional investors, non-financial companies, individuals/families, and banks), a breakdown specific to our dataset. Controlling for various factors, we find that ownership structure is significant in explaining risk differences but that such findings mainly hold for privately owned banks. On the whole, a higher equity stake of either individuals/families or banking institutions is associated with a decrease in asset risk and default risk. Also, institutional investors and non-financial companies seem to impose the riskiest strategies when they hold higher stakes. We further find no significant differences in asset risk and default risk between publicly-held and privately-owned banks. Moreover, for public banks, changes in ownership structure do not affect risk taking. Market forces seem to align the risk-taking behavior of public banks and the ownership structure is no more a determinant to explain risk differences. An exception is that higher stakes of banking institutions in public banks are associated with lower credit and default risk.

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Bibliographic Info

Paper provided by HAL in its series Post-Print with number hal-00918543.

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Date of creation: 2011
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Publication status: Published, Journal of Banking and Finance, 2011, 35, 5, 1237-1340
Handle: RePEc:hal:journl:hal-00918543

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Citations

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Cited by:
  1. Mohsen Afsharian & Anna Kryvko & Peter Reichling, 2011. "Efficiency and Its Impact on the Performance of European Commercial Banks," FEMM Working Papers 110018, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  2. Köhler, Matthias, 2012. "Which banks are more risky? The impact of loan growth and business model on bank risk-taking," Discussion Papers 33/2012, Deutsche Bundesbank, Research Centre.
  3. Pejman Abedifar & Philip Molyneux & Amine Tarazi, 2012. "Risk in Islamic Banking," Working Papers hal-00915115, HAL.
  4. Frank Schmielewski & Thomas Wein, 2012. "Are private banks the better banks? An insight into the principal-agent structure and risk-taking behavior of German banks," Working Paper Series in Economics 236, University of Lüneburg, Institute of Economics.
  5. Trinugroho, Irwan & Agusman, Agusman & Tarazi, Amine, 2014. "Why have bank interest margins been so high in Indonesia since the 1997/1998 financial crisis?," Research in International Business and Finance, Elsevier, vol. 32(C), pages 139-158.
  6. Westman, Hanna, 2011. "The impact of management and board ownership on profitability in banks with different strategies," Journal of Banking & Finance, Elsevier, vol. 35(12), pages 3300-3318.
  7. Tristan Auvray & Olivier Brossard, 2012. "Too Dispersed to Monitor? Ownership Dispersion, Monitoring, and the Prediction of Bank Distress," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(4), pages 685-714, 06.
  8. Amine Tarazi & Nadia Zedek, 2013. "Excess Control Rights, Financial Crisis and Bank Profitability and Risk," Working Papers hal-00916550, HAL.
  9. Shim, Jeungbo, 2013. "Bank capital buffer and portfolio risk: The influence of business cycle and revenue diversification," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 761-772.
  10. Köhler, Matthias, 2013. "Does non-interest income make banks more risky? Retail- versus investment-oriented banks," Discussion Papers 17/2013, Deutsche Bundesbank, Research Centre.
  11. Frank Strobel, 2014. "Bank Insolvency Risk and Z-Score Measures: A Refinement," Discussion Papers 14-06, Department of Economics, University of Birmingham.
  12. Wahyoe Soedarmono & Philippe Rous & Amine Tarazi, 2011. "Bank Capital and Self-Interested Managers: Evidence from Indonesia," Working Papers hal-00918584, HAL.
  13. Bowo Setiyono & Amine Tarazi, 2014. "Disclosure, ownership structure and bank risk: Evidence from Asia," Working Papers hal-00947590, HAL.

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