Do Bank Insiders Impede Equity Issuances?

32 Pages Posted: 2 Jul 2020

See all articles by Martin Richard Goetz

Martin Richard Goetz

Goethe University Frankfurt

Luc Laeven

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Ross Levine

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Date Written: June 19, 2020

Abstract

We evaluate the role of insider ownership in shaping banks’ equity issuances in response to the global financial crisis. We construct a unique dataset on the ownership structure of U.S. banks and their equity issuances and discover that greater insider ownership leads to less equity issuances. Several tests are consistent with the view that bank insiders are reluctant to reduce their private benefits of control by diluting their ownership through equity issuances. Given the connection between bank equity and lending, the results stress that ownership structure can shape the resilience of banks — and hence the entire economy — to aggregate shocks.

Keywords: Ownership Structure, Equity Issuances, Banking, Financial Crisis, Regulation

JEL Classification: G32; G21; G28

Suggested Citation

Goetz, Martin Richard and Laeven, Luc A. and Levine, Ross Eric, Do Bank Insiders Impede Equity Issuances? (June 19, 2020). Available at SSRN: https://ssrn.com/abstract=3631072

Martin Richard Goetz (Contact Author)

Goethe University Frankfurt ( email )

Theodor W Adorno Platz 4
Frankfurt, 60323
Germany

Luc A. Laeven

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Ross Eric Levine

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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