Ownership Structure and Bank Risk: The Effects of Crisis, Market Discipline and Regulatory Pressure

Dung Tran, M. Kabir Hassan and Reza Houston

No 2018-WP-03, NFI Working Papers from Indiana State University, Scott College of Business, Networks Financial Institute

Abstract: Using a large panel of US BHC over the 2001:Q1-2015:Q4, we investigate the risk-taking behaviors of banks within a comparison perspective – between public and private banks - where there exists substantial differences of asymmetry information and agency problems. We document evidence of greater stability of public banks versus their private peers. However, public banks become riskier than private banks during the last crisis. These findings suggest a mixed evidence of risk-taking mitigating role of listing status. Regulatory pressure is effective in limiting risk taking by undercapitalized public banks before, but not during the crisis, casting doubt the effectiveness of regulators during the turmoil times. Public banks with high franchise value expose to risk less than others during the crisis. Debtholders discipline is ineffective in curbing the risk-taking behavior of banks. Our study is of interest for regulators, policymakers who are in search of improving bank risk-taking behavior.

Keywords: bank listing status; risk taking; crisis; market discipline; regulatory pressure (search for similar items in EconPapers)
JEL-codes: G21 G28 G34 G38 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2018-03
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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