Expropriation Risk vs. Government Bailout: Implications for Minority Shareholders of State-Owned Banks

49 Pages Posted: 30 Apr 2020

See all articles by Aldy Fariz Achsanta

Aldy Fariz Achsanta

University of Limoges - Laboratoire d'Analyse et de Prospectives Économiques (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

Date Written: April 6, 2020

Abstract

We investigate the implications of government versus private ownership for bank minority shareholders. Specifically, we use unique data to examine whether the stock prices of government-owned and family-owned banks, equally engaged in related lending, differently react to loan announcements. Our empirical findings show that the expected negative market reaction due to minority shareholder expropriation driven by related lending (“grabbing hand” effect), is offset by shareholders’ expectations of future support from the government (“helping hand” effect). Positive announcement returns are also larger for new loans to state-owned firms than for those to private firms. Our findings support the view that in countries with weak shareholder protection, shareholders of state-owned banks rationally anticipate expropriation, but are willing to accept it in exchange for higher expectations of government support to state- owned banks and to state-owned firms.

Keywords: Bank, government ownership, loan announcements, related party transactions

JEL Classification: G21, G28

Suggested Citation

Achsanta, Aldy Fariz and Lepetit, Laetitia and Tarazi, Amine, Expropriation Risk vs. Government Bailout: Implications for Minority Shareholders of State-Owned Banks (April 6, 2020). Available at SSRN: https://ssrn.com/abstract=3557884 or http://dx.doi.org/10.2139/ssrn.3557884

Aldy Fariz Achsanta (Contact Author)

University of Limoges - Laboratoire d'Analyse et de Prospectives Économiques (LAPE) ( email )

5 rue Félix Eboué
BP 3127
Limoges Cedex 1, 87031
France

HOME PAGE: http://www.unilim.fr/lape/

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

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

5 rue Felix Eboue
Limoges, 87000
France

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