Effect of Ownership Structure on Corporate Performance and Internal Decision-making Mechanism in Mutual Savings Banks

Abstract

This study aims to focus on mutual savings banks in financial sector and explore different corporate performances and internal decision-making mechanism based on ownership structure. Especially, mutual savings banks have unique characteristics different from general corporations and financial institution. In this paper, we analyze deciding factors for management performance of mutual savings banks as financial corporations and, through this, to elucidate causes of their bankruptcy or ultimate failure. For case study, Hankook Savings Bank and Dongbu Savings Bank were selected as representative listed large saving banks with assets over 1 trillion won. This study also selected comparison group which can support indexes that caused insolvency of savings banks with assets of over 1 trillion won and investigated industry average and average of healthy and unhealthy savings banks. The results of case study and analysis on group cases in this study are as follows; Unhealthy savings banks tend to have higher asset ratio against capital than healthy ones and under the circumstances without risk management (system) and internal control system, moral hazard occurred by major stockholders who tried to take advantage of expanded asset for their own personal interests. In addition, lax laws and regulations on capital and ownership structure and relaxation policy on operation regulations produced vulnerable capital structure and abnormal asset structure.