Excess control rights, bank capital structure adjustment and lending

Abstract : We investigate whether excess control rights of ultimate owners in pyramids affect banks' adjustment to their target capital ratio. When ultimate control rights and cash-flow rights are identical, banks increase their capital ratio by issuing equity and by reshuffling their assets without slowing their lending. However, when control rights exceed cash-flow rights, banks are reluctant to issue equity to increase their capital ratio and, instead, shrink their assets by mainly cutting their lending. A deeper investigation shows that this behavior is only apparent in family-controlled banks and in countries with relatively weak shareholder protection rights. Our findings provide new insights in the capital structure adjustment process and have critical policy implications for the implementation of Basel III.
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https://hal-unilim.archives-ouvertes.fr/hal-01134842
Contributeur : Thierno Barry <>
Soumis le : mardi 24 mars 2015 - 13:17:02
Dernière modification le : mercredi 28 février 2018 - 17:06:02

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  • HAL Id : hal-01134842, version 1

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Laetitia Lepetit, Amine Tarazi, Nadia Zedek. Excess control rights, bank capital structure adjustment and lending. Journal of Financial Economics, Elsevier, 2015, 115 (3), pp.574-591. ⟨hal-01134842⟩

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