Too Dispersed to Monitor ? Ownership Dispersion, Monitoring, and the Prediction of Bank Distress

Tristan Auvray () and Olivier Brossard ()
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Olivier Brossard: LEREPS - Laboratoire d'Etude et de Recherche sur l'Economie, les Politiques et les Systèmes Sociaux - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - UT2J - Université Toulouse - Jean Jaurès - UT - Université de Toulouse - Institut d'Études Politiques [IEP] - Toulouse - ENSFEA - École Nationale Supérieure de Formation de l'Enseignement Agricole de Toulouse-Auzeville

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Abstract: This paper conducts an empirical assessment of the theories stating that ownership concentration improves the quality of shareholders' monitoring. In contrast with other studies, we do not use regressions of risk/performance on ownership concentration. Instead, we build an early warning model of bank distress that includes a leading indicator derived from banks' share price, the Merton-KMV distance to default (DD). The significance of this indicator depends on the efficacy of shareholders' monitoring. On a sample of European banks, we show that the predictive power of the DD is satisfactory only when banks' shareholding is characterized by the presence of blockholders.

Keywords: monitoring; ownership concentration; block ownership; bank distress; early warning models; distance to default (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (4)

Published in Journal of Money, Credit and Banking, 2012, 44 (4), pp.685-714. ⟨10.1111/j.1538-4616.2012.00506.x⟩

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Related works:
Journal Article: Too Dispersed to Monitor? Ownership Dispersion, Monitoring, and the Prediction of Bank Distress (2012)
Working Paper: Too dispersed to monitor? Ownership dispersion, monitoring and the prediction of bank distress (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01372475

DOI: 10.1111/j.1538-4616.2012.00506.x

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