Do Bank Insiders Impede Equity Issuances?

41 Pages Posted: 2 Jul 2020 Last revised: 29 Oct 2020

See all articles by Martin Richard Goetz

Martin Richard Goetz

Deutsche Bundesbank - Research Centre; Leibniz Institute for Financial Research SAFE

Luc Laeven

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Ross Levine

Stanford University; National Bureau of Economic Research (NBER)

Date Written: September 03, 2020

Abstract

We evaluate the role of insider ownership in shaping banks’ equity issuances in response to the global financial crisis. We construct a unique dataset on the ownership structure of U.S. banks and their equity issuances and discover that greater insider ownership leads to less equity issuances. Several tests are consistent with the view that bank insiders are reluctant to reduce their private benefits of control by diluting their ownership through equity issuances. Given the connection between bank equity and lending, the results stress that ownership structure can shape the resilience of banks — and hence the entire economy — to aggregate shocks.

Keywords: Ownership Structure, Equity Issuances, Banking, Financial Crisis, Regulation

JEL Classification: G32; G21; G28

Suggested Citation

Goetz, Martin Richard and Laeven, Luc A. and Levine, Ross, Do Bank Insiders Impede Equity Issuances? (September 03, 2020). Available at SSRN: https://ssrn.com/abstract=3631072 or http://dx.doi.org/10.2139/ssrn.3631072

Martin Richard Goetz (Contact Author)

Deutsche Bundesbank - Research Centre ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Luc A. Laeven

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Ross Levine

Stanford University ( email )

Stanford, CA 94305
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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