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Does the presence of institutional investors in family banks affect profitability and risk? Evidence from an emerging market

Bowo Setiyono (bowo.setiyono@etu.unilim.fr) and Amine Tarazi
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Bowo Setiyono: LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges

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Abstract: This study aims to investigate whether the presence of institutional investors in family-controlled banks impacts their performance and risk. Using detailed data on Indonesian banks from 2001 to 2008 and controlling for various factors, our results first show that family-controlled banks are less profitable and more risky than other banks. Specifically, family presence, either under the form of direct ownership, pure single majority, or family directors, is related to higher default risk, income variability, and loan risk. However, the presence of institutional investors as a second stage block holder in family controlled banks tends to mitigate and even reverse such behavior by reducing risk-taking and improving performance. Our results are generally robust with regard to endogeneity issues and alternative specifications.

Keywords: Family bank; performance; risk; emerging market; second largest owner; family director (search for similar items in EconPapers)
Date: 2014-10-23
New Economics Papers: this item is included in nep-ban and nep-sea
Note: View the original document on HAL open archive server: https://unilim.hal.science/hal-01077118v2
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