Ownership structure and risk in publicly held and privately owned Banks

Thierno Amadou Barry (1) , Laetitia Lepetit (1) , Amine Tarazi (1)

1 LAPE - Laboratoire d'Analyse et de Prospective Economique

Using detailed ownership data for a sample of European commercial banks, we analyze the link between ownership structure and risk in both privately owned and publicly held banks. We consider five categories of shareholders that are specific to our dataset. We find that ownership structure is significant in explaining risk differences but mainly for privately owned banks. A higher equity stake of either individuals/families or banking institutions is associated with a decrease in asset risk and default risk. In addition, institutional investors and non-financial companies impose the riskiest strategies when they hold higher stakes. For publicly held banks, changes in ownership structure do not affect risk taking. Market forces seem to align the risk-taking behavior of publicly held banks, such that ownership structure is no longer a determinant in explaining risk differences. However, higher stakes of banking institutions in publicly held banks are associated with lower credit and default risk.

Mots clés: Ownership structure; Bank risk; European banks; Market discipline

Domaines: Economies et finances

Thierno Amadou Barry, Laetitia Lepetit, Amine Tarazi. Ownership structure and risk in publicly held and privately owned Banks. Journal of Banking and Finance, 2011, 35 (5), pp.1327-1340. ⟨10.1016/j.jbankfin.2010.10.004⟩. ⟨hal-00786434⟩