The Effect of Bank Ownership Concentration on Capital Adequacy, Liquidity, and Capital Stability (Basel II and Basel III)

46 Pages Posted: 19 Jul 2011 Last revised: 11 Jan 2013

See all articles by Pichaphop Chalermchatvichien

Pichaphop Chalermchatvichien

Bank of Thailand

Seksak Jumreornvong

Department of Finance, Faculty of Commerce and Accountancy, Thammasat University, Bangkok, Thailand

Pornsit Jiraporn

Pennsylvania State University - School of Graduate Professional Studies (SGPS)

Manohar Singh

Willamette University - Atkinson Graduate School of Management

Date Written: July 17, 2011

Abstract

We explore the effects of ownership concentration on the risk-taking behavior of banks. Our analysis focuses on East Asian countries because these nations have successfully implemented the Basel standards and demonstrate a high degree of regulatory convergence. For the period from 2005 to 2009, we analyze the relation between ownership concentration and capital adequacy (Basel II) and find that an increase in ownership concentration by one standard deviation results in an improvement in capital adequacy by 7.64%. Although Basel III does not go into effect until 2013, we retroactively apply the standards for capital stability on our sample. We find that ownership concentration would have been a significant determinant of capital stability. While at lower levels of ownership concentration, an increase in concentrated ownership would have reduced capital stability; at higher ownership levels, greater ownership concentration would have increased capital stability. We also find that concentrated ownership improves banks’ liquidity. Further, the recent financial crisis does not appear to change the fundamental associations among ownership concentration, capital adequacy, and liquidity.

Keywords: Basel III, Bank Ownership, Capital Adequacy, Capital Stability, Financial Crisis, Basel II

JEL Classification: G01, G18, G21, G28, G34, G38

Suggested Citation

Chalermchatvichien, Pichaphop and Jumreornvong, Seksak and Jiraporn, Pornsit and Singh, Manohar, The Effect of Bank Ownership Concentration on Capital Adequacy, Liquidity, and Capital Stability (Basel II and Basel III) (July 17, 2011). Available at SSRN: https://ssrn.com/abstract=1888486 or http://dx.doi.org/10.2139/ssrn.1888486

Pichaphop Chalermchatvichien

Bank of Thailand ( email )

273 Samsen Road
Bangkhunprom, Bangkok 10200
United States

Seksak Jumreornvong

Department of Finance, Faculty of Commerce and Accountancy, Thammasat University, Bangkok, Thailand ( email )

Bangkok, 10200
Thailand

Pornsit Jiraporn (Contact Author)

Pennsylvania State University - School of Graduate Professional Studies (SGPS) ( email )

30 E. Swedesford Road
Malvern, PA 19355
United States
(484) 753-3655 (Phone)

HOME PAGE: http://www.personal.psu.edu/pxj11/index1.html

Manohar Singh

Willamette University - Atkinson Graduate School of Management ( email )

900 State Street
Salem, OR 97301
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
424
Abstract Views
1,812
rank
70,709
PlumX Metrics