How Sensitive are Shareholders to Bank Risk?

29 Pages Posted: 15 Jan 2008

See all articles by Selcuk Caner

Selcuk Caner

Bilkent University - Faculty of Business Administration

Suheyla Ozyildirim

Bilkent University - Faculty of Business Administration

Ayse Ece Ungan

Bilkent University - Faculty of Business Administration

Date Written: December 2007

Abstract

We test for the existence of market discipline of banks by different types of shareholders. Shareholder discipline manifests itself in the form of monitoring the riskiness of banks as well as influencing the management actions of the banks to limit risk-taking. Shareholders utilize different types of risk measures to monitor bank risk taking. Shareholders influence bank management to improve capital adequacy and loan quality when they observe increasing riskiness. Owner-managers or large shareholders demonstrate significant influence on bank management. We also find that the influence on management in small banks by shareholders is more pronounced.

Keywords: Market discipline, Risk, Monitoring, Influence

JEL Classification: G21, G32, G34

Suggested Citation

Caner, Selcuk and Ozyildirim, Suheyla and Ungan, Ayse Ece, How Sensitive are Shareholders to Bank Risk? (December 2007). Available at SSRN: https://ssrn.com/abstract=1082791 or http://dx.doi.org/10.2139/ssrn.1082791

Selcuk Caner (Contact Author)

Bilkent University - Faculty of Business Administration ( email )

06533 Bilkent, Ankara
Turkey
0 312 290 18 60 (Phone)
0 312 266 49 58 (Fax)

Suheyla Ozyildirim

Bilkent University - Faculty of Business Administration ( email )

06800 Bilkent, Ankara
Turkey

Ayse Ece Ungan

Bilkent University - Faculty of Business Administration ( email )

06533 Bilkent, Ankara
Turkey
0 312 442 21 40 (Phone)
0 312 442 41 61 (Fax)

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