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Ownership Structure and Risk in Publicly Held and Privately Owned Banks

  • 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)

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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File URL: http://hal-unilim.archives-ouvertes.fr/docs/00/91/85/43/PDF/barry_al_2009.pdf
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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
Note: View the original document on HAL open archive server: http://hal-unilim.archives-ouvertes.fr/hal-00918543
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