Ownership Structure and Risk in Publicly Held and Privately Owned Banks

47 Pages Posted: 24 Aug 2009 Last revised: 14 Feb 2010

See all articles by Thierno Barry

Thierno Barry

Université de Limoges, LAPE

Laetitia Lepetit

University of Limoges - Laboratoire d'Analyse et de Prospectives Économiques (LAPE)

Amine Tarazi

University of Limoges - Faculty of Law and Economic Science

Multiple version iconThere are 2 versions of this paper

Date Written: November 2009

Abstract

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.

Keywords: Ownership structure, bank risk, European banks, Market Discipline

JEL Classification: G21, G32

Suggested Citation

Barry, Thierno and Lepetit, Laetitia and Tarazi, Amine, Ownership Structure and Risk in Publicly Held and Privately Owned Banks (November 2009). 22nd Australasian Finance and Banking Conference 2009. Available at SSRN: https://ssrn.com/abstract=1460703 or http://dx.doi.org/10.2139/ssrn.1460703

Thierno Barry

Université de Limoges, LAPE ( email )

5 rue Félix Eboué
BP 3127
Limoges Cedex 1, 87031
France

Laetitia Lepetit

University of Limoges - Laboratoire d'Analyse et de Prospectives Économiques (LAPE) ( email )

5 rue Felix Eboue
BP 3127
Limoges Cedex 1, 87031
France
+33555149213 (Phone)

HOME PAGE: http://www.unilim.fr/lape/

Amine Tarazi (Contact Author)

University of Limoges - Faculty of Law and Economic Science ( email )

5 rue Felix Eboue
Limoges, 87000
France

Register to save articles to
your library

Register

Paper statistics

Downloads
376
Abstract Views
2,158
rank
77,604
PlumX Metrics