Impact of Corporate Ownership on Risk-Taking and Returns at Thrift Institutions

46 Pages Posted: 8 Sep 2006

See all articles by Walter Dolde

Walter Dolde

University of Connecticut - Department of Finance

John D. Knopf

University of Connecticut - Department of Finance

Date Written: September 2006

Abstract

This paper examines the relationship between ownership structure, other corporate governance variables, and firm risk-taking and returns for the period 1990 to 2003. Our results suggest that the persistent, underlying relationship between insider ownership and risk-taking is U-shaped for both stock and operating returns. The Sharpe ratio for operating returns exhibits an inverted U-shaped association with insider ownership. These observations are consistent with insiders achieving the efficient frontier between risk and return, i.e. although risk-taking varies with the level of ownership, average returns are higher when risk is higher. We also find strong evidence of negative linear relationships between institutional ownership and both operating and stock volatility and positive relationships with operating returns and Tier 1 capital.

Suggested Citation

Dolde, Walter and Knopf, John D., Impact of Corporate Ownership on Risk-Taking and Returns at Thrift Institutions (September 2006). Available at SSRN: https://ssrn.com/abstract=928652 or http://dx.doi.org/10.2139/ssrn.928652

Walter Dolde

University of Connecticut - Department of Finance ( email )

School of Business
One Univesity Place
Stamford, CT 06901-2315
United States
203-301-0806 (Phone)

John D. Knopf (Contact Author)

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States

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