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The impact of management and board ownership on profitability in banks with different strategies

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  • Westman, Hanna

Abstract

In this study I combine the ownership and diversification literature and show that the agency problem varies across traditional, diversified and non-traditional banks. In a sample of European banks, I find that management ownership has a positive impact on profitability in non-traditional banks, whereas board ownership has a positive impact on profitability in traditional banks. These findings indicate that management ownership is important in opaque banks, which are difficult to monitor, whereas board ownership is important in banks where the government guaranteed safety-net reduces the monitoring incentive of depositors, but which are not too complex or opaque for the board to monitor.

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  • 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.
  • Handle: RePEc:eee:jbfina:v:35:y:2011:i:12:p:3300-3318 DOI: 10.1016/j.jbankfin.2011.05.013
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    Cited by:

    1. Basiru Salisu KALLAMU, 2016. "Impact of Corporate Governance on Diversification in Finance Companies: Evidence from Malaysia," Journal of Economics Bibliography, KSP Journals, vol. 3(1), pages 108-122, March.
    2. 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.
    3. Westman, Hanna, 2014. "Crisis performance of European banks – does management ownership matter?," Research Discussion Papers 28/2014, Bank of Finland.
    4. Lin, Kun-Li & Doan, Anh Tuan & Doong, Shuh-Chyi, 2016. "Changes in ownership structure and bank efficiency in Asian developing countries: The role of financial freedom," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 19-34.
    5. Hasan AYAYDIN & Ýbrahim KARAASLAN, 2014. "Stock Market Development, Bank Concentration, Ownership Structure, and Bank Performance: Evidence from Turkey," Journal of Economics and Political Economy, KSP Journals, vol. 1(1), pages 49-67, September.
    6. Ayaydin, Hasan & Karaaslan, İbrahim, 2014. "Stock Market Development, Bank Concentration, Ownership Structure, and Bank Performance: Evidence from Turkey," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 49-67.

    More about this item

    Keywords

    Banks; Management ownership; Board ownership; Traditional vs. non-traditional banking operations; Diversification;

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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