Bank Ownership Concentration Research Articles

The nonlinear effects of ownership concentration and board structure on bank performance

This study looks into the relationships between the banks? ownership structures, the characteristics of their boards, and their performance. A bank?s performance varies depending on a series of different factors. In recent years, the evaluation of performance in the context of corporate governance practices has gained importance. This study considers the issue from the perspective of developed nations, looking at the examples of the United States and the United Kingdom. The findings demonstrate that adopting certain corporate governance practices improves a bank?s performance levels over previous periods. Having a duality in the board structure and increasing its proportion of nonexecutive board members improve a bank?s performance. In contrast, a statistically significant negative relationship was found between bank performance and board size, board members appointed for their specific skills, and the number of board meetings. It was also discovered that there is no linear relationship between the proportion of strictly independent board members on a board of directors and performance. A nonlinear relationship was found between bank ownership concentration and their performance. The discovery of a nonlinear relationship between performance and increasing concentration in a bank?s ownership structure and the proportion of strictly independent board members on its board is a sign that there is an optimal level for these variables.

Bank ownership concentration and stock price informativeness: International evidence

AbstractThis paper examines the relation between ownership concentration and stock price informativeness around the world. Using a sample of banks from 59 countries between 2002 and 2019, we find robust evidence from a linear model supporting the entrenchment effect. However, the nonlinear model shows that the effect of control rights on the informativeness of stock prices forms a U‐shaped curve. We also document that banks with controlling shareholders have more volatility in the information content of bank stock prices in a poor regulatory environment or developing countries.

Do Commercial Banks Benefit From Bank-FinTech Strategic Collaboration?

The banking sector has changed fundamentally as digital transformation is enabling new technology-driven banking business and creating novel customer requirements. Embracing bank-FinTech strategic collaboration (FSC) has been particularly vital to digital transformation of Chinese city commercial bank. The aim of this paper is to study the impact of FSC on the efficiency of city commercial banks. Using data from Chinese city commercial banks between 2014 and 2019, we first measure bank efficiency scores using stochastic frontier approach. Moreover, we employ the propensity score matching approach and the difference in difference estimation to explore the effect of FSC on bank efficiency. We find that FSC significantly improves bank cost and interest revenue efficiency in the aggregate. Our results also indicate that the positive relationship between FSC and cost efficiency is negatively associated with bank ownership concentration. In addition, the positive effects of FSC on revenue efficiency are weaker in state-owned city banks than in non-state-owned city banks.

Banks’ credit risk, systematic determinants and specific factors: recent evidence from emerging markets

Non-performing loans (NPLs, henceforth) represent the main challenge that jeopardizes the steadiness of the banking sector. The purpose of this study is to explore the main determinants of banks' non-performing loans in emerging markets. To better understand the hidden aspects of these determinants, the current research employs a panel approach and dynamic data estimates through Generalized Methods of Moments (GMM) using data of 53 banks listed in five Middle East and North African (MENA) emerging markets between 2000 and 2019. This study documents that GDP growth, unemployment, bank capitalization, bank performance, bank operating inefficiency, bank ownership concentration, inflation, sovereign debt and bank size are the main determinants of NPLs, whereas, loan growth, bank diversification and interbank competition were found to have an insignificant impact on NPLs. This analysis is motivated by the recent economic changes surrounding the financial systems in emerging countries with the aim to provide new evidence and insights. The results show that non-performing loans can be explained mainly by macroeconomic variables and bank-specific factors with interesting differences in their quantitative impacts. This study has substantial theoretical and practical contributions. It shows strong evidence on the leading indicators of future problematic loans. The identification of these factors would help regulators address appropriate interventions, design ample credit policies and adopt adjusted prudential regulations. Further, it empowers the regulatory authorities with an in-depth understanding of credit risk determinants, allowing them to place emphasis on risk management systems and procedures that minimize borrowers' default in order to avert future financial instability. Our findings underscore the necessity of closely monitoring bank-specific factors along with reinforcing country level mechanisms to reduce banks’ credit risk.

Bank liquidity creation: Does ownership structure matter?

This paper uses a new, hand-collected database on ownership structure for a sample of commercial banks from 17 western European countries to explore the relationship between bank ownership structure and bank liquidity creation over the period 2004–2018. We focus on bank ownership concentration and on the identity of the major owner. Our findings are twofold: first, we find that ownership concentration has a significant and positive impact on liquidity creation. Specifically, we find that banks with over 65 % controlling ownership create more liquidity than other banks. Secondly, we analyze the impact of the nature of the owner on liquidity creation. We find that banks tend to create more liquidity when the owner is another bank or a state, holding a stake above 50 %, 65 % for a non-financial company, 75 % for a family and 85 % for a financial institution.

Bank ownership concentration, board of directors and loan portfolios' quality: evidence from the Tunisian banking sector

Bank ownership concentration, board of directors and loan portfolios' quality: evidence from the Tunisian banking sector

Bank ownership concentration, board of directors and loan portfolios' quality: evidence from the Tunisian banking sector

This paper examines the impact of banks' corporate governance mechanisms in terms of ownership structure, board size and composition on the loan quality in the Tunisian banking sector. To do so we use panel data method and a sample that contains the ten largest banks in Tunisia over the period 2001-2012. Our main findings show that ownership concentration worsens loan quality in the Tunisian banking sector. However, the presence of independent members in the board of directors improves loan quality through better monitoring actions. Our findings also suggest that Tunisian banks with CEO duality manage better their loans.

Locally Owned Bank Concentration and Business Start-Ups and Closures in U.S. Metropolitan, Micropolitan, and Rural Counties from 1980-2010

Access to financial capital is vital for the sustainability of the local business sector. Recent research on the restructuring of the financial industry from local owned banks to interstate conglomerates has raised questions about the impact on local economies, especially in rural areas. We examine the impact of bank ownership concentration on business formations, continuations, and deaths in metropolitan, micropolitan, and rural non-core U.S. counties. Using limited-access Census data, we find that local bank concentration is positively related to business births and deaths, or churn, in rural counties, but the opposite effects occur in metropolitan areas. We demonstrate robustness to several specifications and spatial spillover effects.

Ownership concentration and bank risk: international study on acquisitions

ABSTRACTThis paper explores the effects of different types of bank ownership concentration on changes in bank risk during acquisition years. Using multi-country data from 2000 to 2006, during which market failures caused by various crises and government interventions are less influential to acquisition decisions, we collect 505 banking acquisition deals from 23 countries to examine which type of ownership concentration (such as financial intermediary, capital investor, non-financial, and state ownership) brings larger changes to an acquirer’s risk from pre-acquisition year to post-acquisition year (including non-performing loans, capital adequacy ratio, loan loss reserve, and credit rating). The empirical analyses show that acquirer banks with a concentration of shares owned by financial intermediaries and non-financial firms experience larger risk changes during acquisition years. In contrast, the risk changes of acquirer banks with a concentration of capital investors and state ownership are lower. Robustness checks from the random effect estimation, instrumental variables model, reverse causality, and different subsamples of (non-)U.S. or different levels of regulation enforcement confirm these results.

Ownership concentration and bank profitability

We investigate whether ownership concentration influences bank profitability in a developing country context. We focus on bank ownership concentration measured as the amount of direct equity held by a majority shareholder categorised into: high ownership concentration, moderate ownership concentration and disperse ownership. We find that banks with high ownership concentration have higher return on assets, higher net interest margin and higher recurring earning power while banks with dispersed ownership have lower return on assets but have higher return on equity. Also, higher cost efficiency improves the return on assets of widely-held banks and the return on equity of banks with moderate ownership. The findings have implications.

Relationship between bank ownership concentration on capital adequacy, liquidity, and capital stability in the listed banks in Tehran stock exchange

In this study we explore the effects of ownership concentration on the risk-taking behavior of banks. Our analysis focuses on East Asian countries because these nations have successfully implemented the Basel standards and have demonstrated a high degree of regulatory convergence. For the period from 2005 to 2009, we analyzed the relation between ownership concentration and capital adequacy (Basel II) and find that an increase in ownership concentration by one standard deviation results in an improvement in capital adequacy by 32%. Motivated by public policy considerations, we analyze the impact of bank ownership structure as a governance mechanism on capital adequacy and liquidity in Asian banks. The results show that as ownership concentration rises, banks become well capitalized and more liquid. The impact is both statistically and economically significant. Our results complement recent findings reported by Peni and Vahamaa (2011) that corporate governance mechanisms are material factors in explaining banks’ behavior and their market performance. Our results also support Vauhkonen’s (2011) findings that market discipline manifested through ownership concentration significantly impacts banks’ capital adequacy, liquidity, and capital stability Keywords: Basel II; bank ownership; capital adequacy; capital stability; financial crisis

Bank ownership and connected lending

Bank ownership concentration may not only induce banks’ controlling owners to become involved in connected lending but also deter them from doing so. This paper examines how the cash flow rights of the banks’ controlling owners are associated with the need for special connections with banks, which is a proxy measure of connected lending. Using data from more than 2,600 firms across 25 countries, this study finds that the cash flow rights increase the need for special connections, but the increase becomes smaller as the cash flow rights increase. No evidence is found that the cash flow rights result in a decrease in the need for special connections.

The effect of bank ownership concentration on capital adequacy and liquidity

Article history: Received March 25, 2015 Received in revised format June 1 2015 Accepted June 1

The Effect of Bank Ownership Concentration on Capital Adequacy, Liquidity, and Capital Stability

We explore the effects of ownership concentration on the risk-taking behavior of banks. Our analysis focuses on East Asian countries because these nations have successfully implemented the Basel standards and demonstrate a high degree of regulatory convergence. For the period from 2005 to 2009, we analyzed the relation between ownership concentration and capital adequacy (Basel II) and find that an increase in ownership concentration by one standard deviation results in an improvement in capital adequacy by 7.64 %. Although Basel III does not go into effect until 2013, we retroactively apply the standards for capital stability on our sample. We find that ownership concentration would have been a significant determinant of capital stability. While at lower levels of ownership concentration, an increase in concentrated ownership would have reduced capital stability; at higher ownership levels, greater ownership concentration would have increased capital stability. We also find that concentrated ownership improves banks’ liquidity. Further, the recent financial crisis does not appear to change the fundamental associations among ownership concentration, capital adequacy, and liquidity.

The impact of bank ownership concentration on impaired loans and capital adequacy

This paper examines the impact of bank ownership concentration on two indicators of bank riskiness, namely banks’ non-performing loans and capital adequacy. Using balance sheet information for around 500 commercial banks from more than 50 countries averaged over 2005–2007, we find that concentrated ownership (proxied by different levels of shareholding) significantly reduces a bank’s non-performing loans ratio, conditional on supervisory control and shareholders protection rights. Furthermore, ownership concentration affects the capital adequacy ratio positively conditional on shareholder protection. At low levels of shareholder protection rights and supervisory control, ownership concentration reduces bank riskiness.