Pyramidal Group Structure and Bank Risk in Thailand

Posted: 23 May 2021

See all articles by Yupana Wiwattanakantang

Yupana Wiwattanakantang

National University of Singapore - Department of Finance ; European Corporate Governance Institute (ECGI)

Pramuan Bunkanwanicha

ESCP Business School

Jyoti P. Gupta

European School of Management (ESCP-EAP)

Date Written: May 1, 2016

Abstract

This paper investigates how banks and finance companies operate in business groups. Using uniquely detailed ownership data from Thailand, we find that the controlling share- holders extensively use pyramids to control banks and finance companies and assign different lending strategies across pyramidal tiers. Lower-tier banks tend to extend loans more aggressively and perform more poorly, while upper tier banks carry out more profitable investments. After the crisis hit, upper-tier banks survived and almost all lower-tier banks went bankrupt. Our results suggest that the multilayer organisational structure of bank ownership can affect a bank’s lending behavior and its resistance to economic shocks.

Keywords: Bank, business groups, pyramid, ownership structure, Thailand, Family firms

JEL Classification: G21, G32

Suggested Citation

Wiwattanakantang, Yupana and Bunkanwanicha, Pramuan and Gupta, Jyoti, Pyramidal Group Structure and Bank Risk in Thailand (May 1, 2016). Journal of Comparative Economics 44 (2016) 272-288, Available at SSRN: https://ssrn.com/abstract=3849162

Yupana Wiwattanakantang (Contact Author)

National University of Singapore - Department of Finance ( email )

Business School
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Singapore, 117592
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European Corporate Governance Institute (ECGI) ( email )

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Belgium

Pramuan Bunkanwanicha

ESCP Business School ( email )

79 Avenue de la Republique
Paris, 75011
France

Jyoti Gupta

European School of Management (ESCP-EAP) ( email )

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France
+33 1 49 23 22 94 (Phone)
+33 1 49 23 20 80 (Fax)

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