Does Public–Private Status Affect Bank Risk Taking? Worldwide Evidence

Abstract

In this paper, we examine risk taking by publicly traded and privately owned banks in an institutionally diversified international sample of countries. Using the Z–score as our primary risk proxy, we find that publicly traded banks engage in less risky activities than their privately owned peers. We further investigate whether listing status (i.e., public or private) impacts bank risk taking before and after the recent financial crisis and across different institutional environments. We find that public banks are likely to exhibit less risk taking than their private counterparts in countries with weak institutions. Further, we find that publicly traded banks are engaging in less risk-taking activities compared to private banks in the pre-crisis and post-crisis alike, but more in the post-crisis, across all countries.

Keywords: Private Banks, Publicly Traded Banks, Risk Taking, Financial Crisis

JEL Classification: G21, G28, G38