Ownership structure, risk and performance in the European banking industry

Giuliano Iannotta, Giacomo Nocera () and Andrea Sironi ()
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Giuliano Iannotta: Università Bocconi
Giacomo Nocera: Audencia Recherche - Audencia Business School

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Abstract: We compare the performance and risk of a sample of 181 large banks from 15 European countries over the 1999-2004 period and evaluate the impact of alternative ownership models, together with the degree of ownership concentration, on their profitability, cost efficiency and risk. Three main results emerge. First, after controlling for bank characteristics, country and time effects, mutual banks and government-owned banks exhibit a lower profitability than privately owned banks, in spite of their lower costs. Second, public sector banks have poorer loan quality and higher insolvency risk than other types of banks while mutual banks have better loan quality and lower asset risk than both private and public sector banks. Finally, while ownership concentration does not significantly affect a bank's profitability, a higher ownership concentration is associated with better loan quality, lower asset risk and lower insolvency risk. These differences, along with differences in asset composition and funding mix, indicate a different financial intermediation model for the different ownership forms.

Keywords: European banking; Ownership; Governance; Performance (search for similar items in EconPapers)
Date: 2007
Note: View the original document on HAL open archive server: https://audencia.hal.science/hal-00861806v1
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Citations: View citations in EconPapers (366)

Published in Journal of Banking and Finance, 2007, 31 (7), pp.2127-2149. ⟨10.1016/j.jbankfin.2006.07.013⟩

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Journal Article: Ownership structure, risk and performance in the European banking industry (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00861806

DOI: 10.1016/j.jbankfin.2006.07.013

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