Does the Presence of Institutional Investors in Family Banks Affect Profitability and Risk? Evidence from an Emerging Market

44 Pages Posted: 24 Oct 2014

See all articles by Bowo Setiyono

Bowo Setiyono

Université de Limoges, LAPE; Universitas Gadjah Mada (UGM) - Faculty of Economics and Business (FEB)

Amine Tarazi

University of Limoges - Faculty of Law and Economic Science

Date Written: October 23, 2014

Abstract

This study aims to investigate whether the presence of institutional investors in family-controlled banks impacts their performance and risk. Using detailed data on Indonesian banks from 2001 to 2008 and controlling for various factors, our results first show that family-controlled banks are less profitable and more risky than other banks. Specifically, family presence, either under the form of direct ownership, pure single majority, or family directors, is related to higher default risk, income variability, and loan risk. However, the presence of institutional investors as a second stage block holder in family controlled banks tends to mitigate and even reverse such behavior by reducing risk-taking and improving performance. Our results are generally robust with regard to endogeneity issues and alternative specifications.

Keywords: Family bank, performance, risk, emerging market, second largest owner, family director

JEL Classification: G21, G28, G32, G34

Suggested Citation

Setiyono, Bowo and Tarazi, Amine, Does the Presence of Institutional Investors in Family Banks Affect Profitability and Risk? Evidence from an Emerging Market (October 23, 2014). Available at SSRN: https://ssrn.com/abstract=2513862 or http://dx.doi.org/10.2139/ssrn.2513862

Bowo Setiyono (Contact Author)

Université de Limoges, LAPE ( email )

5 rue Félix Eboué BP3127
LIMOGES, 87031
France

Universitas Gadjah Mada (UGM) - Faculty of Economics and Business (FEB)

Jl. Humaniora, Bulaksumur
Sleman
Jogjakarta, DI Yogyakarta 55281
Indonesia

Amine Tarazi

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

5 rue Felix Eboue
Limoges, 87000
France

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
71
Abstract Views
634
rank
359,331
PlumX Metrics