Ownership Structure and Risk-taking Behavior: Evidence from Banks in Korea and Japan

Sun Eae Chun, Mamoru Nagano () and Min Hwan Lee

MPRA Paper from University Library of Munich, Germany

Abstract: This study analyzes the effects of managerial ownership on the risk-taking behavior of Korean and Japanese banks during the relatively regulated period of the late 1990s to the early 2000s. It finds that managerial ownership alone does not affect either the risk or the profit levels of Korean banks. In contrast, an increase in managerial ownership adds to the total risk of Japanese banks. However, increased risk-taking behavior does not produce higher levels of profit for Japanese banks. The coefficients of the interaction term between franchise value and managerial ownership are negative and statistically significant for both the Korean and the Japanese banking industries. This means that an increase in managerial ownership at banks with high franchise values discourages risk-taking behavior. The result confirms the disciplinary role of franchise value on the risk-taking behavior of banks. It also falls in line with previous literature supporting the moral hazard hypothesis based on research into the economies of the U.S. and other countries.

Keywords: Bank ownership structure; managerial ownership; moral hazard; franchise value; risk-taking behavior (search for similar items in EconPapers)
JEL-codes: G20 G21 G32 (search for similar items in EconPapers)
Date: 2010-09
New Economics Papers: this item is included in nep-ban and nep-bec
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Related works:
Journal Article: Ownership Structure and Risk‐taking Behavior: Evidence from Banks in Korea and Japan (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:25334

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