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Ownership concentration and market value of European banks

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  • Ilduara Busta
  • Evis Sinani

    ()

  • Steen Thomsen

Abstract

This paper investigates the relationship between ownership concentration and market value of European banks, and the role of the institutional environment in shaping this relationship. Using GMM dynamic estimator on a sample of European banks over a 13-year period (1993–2005) we find on average a negative effect of ownership concentration on bank value, measured by Tobin's Q. However, this effect varies across different institutional settings; while higher ownership concentration results in a lower bank value particularly in the countries belonging to German legal family, the impact of ownership concentration is positive in Scandinavia. We propose that, besides the legal protection of small investors, the differences in the impact of ownership concentration across the countries could be due to the identity of the predominant owners, i.e. financial institutions in Germany and trusts and foundations in Scandinavia. This in turn implies that restrictions of shareholdings in banks could alleviate governance problems in some countries, but lower bank valuation in others. Copyright Springer Science+Business Media, LLC. 2014

Suggested Citation

  • Ilduara Busta & Evis Sinani & Steen Thomsen, 2014. "Ownership concentration and market value of European banks," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(1), pages 159-183, February.
  • Handle: RePEc:kap:jmgtgv:v:18:y:2014:i:1:p:159-183
    DOI: 10.1007/s10997-012-9223-8
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    References listed on IDEAS

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    1. repec:eee:riibaf:v:44:y:2018:i:c:p:547-565 is not listed on IDEAS
    2. repec:kap:jmgtgv:v:22:y:2018:i:4:d:10.1007_s10997-018-9405-0 is not listed on IDEAS
    3. Caspar Rose, 2017. "The relationship between corporate governance characteristics and credit risk exposure in banks: implications for financial regulation," European Journal of Law and Economics, Springer, vol. 43(1), pages 167-194, February.

    More about this item

    Keywords

    Corporate governance; Ownership structure; Legal families; Banks; Europe; G21; G32; G34;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • 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

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