Ownership Structure and Risk in Publicly Held and Privately Owned Banks

Posted: 6 Nov 2010 Last revised: 22 Mar 2014

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 4, 2010

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 that are specific to our dataset. We find that ownership structure is significant in explaining risk differences but mainly for privately owned banks. A higher equity stake of either individuals/families or banking institutions is associated with a decrease in asset risk and default risk. In addition, institutional investors and non-financial companies impose the riskiest strategies when they hold higher stakes. For publicly held banks, changes in ownership structure do not affect risk taking. Market forces seem to align the risk-taking behavior of publicly held banks, such that ownership structure is no longer a determinant in explaining risk differences. However, higher stakes of banking institutions in publicly held 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 4, 2010). Journal of Banking and Finance, vol.35(5), pp 1327-1340, 2011. Available at SSRN: https://ssrn.com/abstract=1703080

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

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