Pyramidal Group Structure and Bank Risk in Thailand
Posted: 23 May 2021
Date Written: May 1, 2016
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
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