Commercial Banks versus Stakeholder Banks: Same Business, Same Risks, Same Rules?

Abstract:     
This paper develops a contingency approach, to explain how bank ownership influences bank stability, as well as the effect of competition and regulation on bank stability. Using a country-level panel dataset for the period 1993-2007, we show that savings banks and cooperative banks (stakeholder banks) are more stable than commercial banks, while in systems with a high presence of cooperatives and savings banks, commercial banks are less stable than they otherwise would be. We also show that the effect of competition and bank regulation (in terms of capital regulations, deposit insurance, and activity restrictions) on bank stability is contingent upon the bank ownership type. These findings yield important policy implications. The same regulation and degree of competition has different effects on bank risk taking, depending on the bank’s ownership structure.

Number of Pages in PDF File: 57

Keywords: Ownership Structure, Risk-taking, Systemic Financial Stability, Regulation, Competition, Commercial Bank, Stakeholders’ Bank

JEL Classification: G21, G32, G18, G38.

working papers series