Institutional Ownership, Diversification, and Riskiness of Bank Holding Companies

31 Pages Posted: 6 Jul 2013

See all articles by Saiying Deng

Saiying Deng

Southern Illinois University at Carbondale

Elyas Elyasiani

Temple University - Department of Finance

Jingyi Jia

Southern Illinois University at Edwardsville - Department of Economics & Finance

Date Written: August 2013

Abstract

We examine the relationship among the level and stability of institutional ownership, diversification, and riskiness of publicly traded bank holding companies. We find that large and stable institutional ownership is associated with a higher (lower) level of geographic, revenue, and nontraditional banking (asset) diversification and lower risk, suggesting that institutional investors are prudent and favor riskÔÇÉreducing diversification strategies. The association between institutional ownership level and diversification is more pronounced under deregulation and during the crisis, suggesting a substitution effect between regulation and market discipline, and a greater level of monitoring and/or advising by institutional investors during the crisis, respectively.

Keywords: BHC, diversification, institutional ownership, risk, market discipline institutional ownership, diversification and riskiness of bank holding companies

JEL Classification: G21, G32

Suggested Citation

Deng, Saiying and Elyasiani, Elyas and Jia, Jingyi, Institutional Ownership, Diversification, and Riskiness of Bank Holding Companies (August 2013). Financial Review, Vol. 48, Issue 3, pp. 385-415, 2013. Available at SSRN: https://ssrn.com/abstract=2290445 or http://dx.doi.org/10.1111/fire.12008

Saiying Deng

Southern Illinois University at Carbondale ( email )

Carbondale, IL
United States

Elyas Elyasiani

Temple University - Department of Finance ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States
215-204-5881 (Phone)
215-204-5698 (Fax)

Jingyi Jia

Southern Illinois University at Edwardsville - Department of Economics & Finance ( email )

Edwardsville, IL 62026
United States

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