Government intervention, bank ownership and risk-taking during the Indonesian financial crisis

Agusman Agusman, Grant S. Cullen, Dominic Gasbarro, Gary S. Monroe and J. Kenton Zumwalt

Pacific-Basin Finance Journal, 2014, vol. 30, issue C, 114-131

Abstract: The 1997/98 financial crisis forced the Indonesian government to inject capital into selected banks, introduce deposit insurance and change capital requirements. This study investigates the relation between highly concentrated ownership and bank risk-taking using a sample of 52 insured private commercial Indonesian banks during the 1995–2003 period. For restructured banks, ownership concentration is positively related to overall risk, and negatively related to credit and liquidity risks, especially during the relaxed capital adequacy requirement period. Liquidity risk is reduced when the government and owners contribute additional capital, and credit risk is lowered as the government removes bad loans from problematic banks.

Keywords: Government intervention; Bank risk taking; Ownership structure; Blanket guarantee; Capital regulation (search for similar items in EconPapers)
JEL-codes: G21 G28 G30 G32 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:30:y:2014:i:c:p:114-131

DOI: 10.1016/j.pacfin.2014.07.003

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