IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Ownership structure, risk and performance in the European banking industry

  • Giuliano Iannotta

    (Universita Bocconi - Università Bocconi)

  • Giacomo Nocera

    ()

    (Audencia Recherche - Audencia)

  • Andrea Sironi

    (Universita Bocconi - Università Bocconi)

Registered author(s):

    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.

    If 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.

    File URL: http://hal-audencia.archives-ouvertes.fr/hal-00861806/document
    Download Restriction: no

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

    as
    in new window

    Length:
    Date of creation: 2007
    Date of revision:
    Publication status: Published in Journal of Banking and Finance, Elsevier, 2007, 31 (7), pp.2127-2149. <10.1016/j.jbankfin.2006.07.013>
    Handle: RePEc:hal:journl:hal-00861806
    DOI: 10.1016/j.jbankfin.2006.07.013
    Note: View the original document on HAL open archive server: http://hal-audencia.archives-ouvertes.fr/hal-00861806
    Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

    References listed on IDEAS
    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.:

    as in new window
    1. Gary Gorton & Richard Rosen, . "Corporate Control, Portfolio Choice, and the Decline of Banking," Rodney L. White Center for Financial Research Working Papers 2-93, Wharton School Rodney L. White Center for Financial Research.
    2. Fraser, Donald R. & Zardkoohi, Asghar, 1996. "Ownership structure, deregulation, and risk in the savings and loan industry," Journal of Business Research, Elsevier, vol. 37(1), pages 63-69, September.
    3. Allen Berger, 1994. "The Relationship Between Capital and Earnings in Banking," Center for Financial Institutions Working Papers 94-17, Wharton School Center for Financial Institutions, University of Pennsylvania.
    4. Andrei Shleifer & Robert W. Vishny, 1996. "A Survey of Corporate Governance," NBER Working Papers 5554, National Bureau of Economic Research, Inc.
    5. Saunders, Anthony & Strock, Elizabeth & Travlos, Nickolaos G, 1990. " Ownership Structure, Deregulation, and Bank Risk Taking," Journal of Finance, American Finance Association, vol. 45(2), pages 643-54, June.
    6. O'Hara, Maureen, 1981. "Property Rights and the Financial Firm," Journal of Law and Economics, University of Chicago Press, vol. 24(2), pages 317-32, October.
    7. Berger, Allen N. & Humphrey, David B., 1997. "Efficiency of financial institutions: International survey and directions for future research," European Journal of Operational Research, Elsevier, vol. 98(2), pages 175-212, April.
    8. Berger, Allen N. & Bonime, Seth D. & Covitz, Daniel M. & Hancock, Diana, 2000. "Why are bank profits so persistent? The roles of product market competition, informational opacity, and regional/macroeconomic shocks," Journal of Banking & Finance, Elsevier, vol. 24(7), pages 1203-1235, July.
    9. Alejandro Micco & Ugo Panizza & Mónica Yañez, 2004. "Bank Ownership and Performance," IDB Publications (Working Papers) 6685, Inter-American Development Bank.
    10. Loretta J. Mester, 1989. "Testing for expense preference behavior: mutual versus stock savings and loans," Working Papers 89-27, Federal Reserve Bank of Philadelphia.
    11. Rasmusen, Eric, 1988. "Mutual Banks and Stock Banks," Journal of Law and Economics, University of Chicago Press, vol. 31(2), pages 395-421, October.
    12. Sapienza, Paola, 2004. "The effects of government ownership on bank lending," Journal of Financial Economics, Elsevier, vol. 72(2), pages 357-384, May.
    13. Valnek, Tomas, 1999. "The comparative performance of mutual building societies and stock retail banks," Journal of Banking & Finance, Elsevier, vol. 23(6), pages 925-938, June.
    14. Altunbas, Yener & Evans, Lynne & Molyneux, Philip, 2001. "Bank Ownership and Efficiency," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(4), pages 926-54, November.
    15. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    16. Cordell, Lawrence R & MacDonald, Gregor D & Wohar, Mark E, 1993. "Corporate Ownership and the Thrift Crisis," Journal of Law and Economics, University of Chicago Press, vol. 36(2), pages 719-56, October.
    17. Houston, Joel F. & James, Christopher, 1995. "CEO compensation and bank risk Is compensation in banking structured to promote risk taking?," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 405-431, November.
    18. McAllister, Patrick H. & McManus, Douglas, 1993. "Resolving the scale efficiency puzzle in banking," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 389-405, April.
    19. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    20. 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.).
    21. Mark Flannery, 2001. "The Faces of “Market Discipline”," Journal of Financial Services Research, Springer;Western Finance Association, vol. 20(2), pages 107-119, October.
    22. John Goddard & Phil Molyneux & John O. S. Wilson, 2004. "The profitability of european banks: a cross-sectional and dynamic panel analysis," Manchester School, University of Manchester, vol. 72(3), pages 363-381, 06.
    23. Giuliano Iannotta, 2006. "Testing for Opaqueness in the European Banking Industry: Evidence from Bond Credit Ratings," Journal of Financial Services Research, Springer;Western Finance Association, vol. 30(3), pages 287-309, December.
    24. Robert R. Bliss & Mark J. Flannery, 2000. "Market discipline in the governance of U.S. Bank Holding Companies: monitoring vs. influencing," Working Paper Series WP-00-3, Federal Reserve Bank of Chicago.
    25. Fama, Eugene F & Jensen, Michael C, 1983. "Agency Problems and Residual Claims," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 327-49, June.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-00861806. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.