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The Risk Weighted Ownership Index: an ex-ante measure of banks' risk and performance

Author

Listed:
  • Luca Bellardini

    (University of Rome Tor Vergata)

  • Pierluigi Murro

    (LUISS University)

  • Daniele Previtali

    (University of Naples Parthenope)

Abstract

Attributing ratings to the top-20 owners, we construct a Risk-Weighted Ownership index (RWO) to measure the profitability and risk-taking behaviour of the ownership structure at banks. Collecting data from 19 European countries plus the UK over the 2008-2017 period, preliminary results show strong evidence that RWO measures are significant in explaining bank performance and risk, at both an accounting and a market-based level. Overall, these results suggest that not only markets and regulators should look at bank’s owners: instead, it is far more relevant to assess the contribution carried by top-owners to bank risk, both individually and collectively.

Suggested Citation

  • Luca Bellardini & Pierluigi Murro & Daniele Previtali, 2019. "The Risk Weighted Ownership Index: an ex-ante measure of banks' risk and performance," Working Papers CASMEF 1904, Dipartimento di Economia e Finanza, LUISS Guido Carli.
  • Handle: RePEc:lui:casmef:1904
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    File URL: http://economiaefinanza.luiss.it/sites/economiaefinanza.luiss.it/files/1904wp.pdf
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    Keywords

    bank; ownership; risk; corporate governance;
    All these keywords.

    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

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