Organizational Structure and Performance in European Banks: A Reassessment

Abstract

Using a large panel of over 300 banks for 15 years from 19 countries, we study the impact of ownership structure on performance in European banking. The specific measures we use are profitability, loan losses and cost efficiency. Our specific contribution is to use finer classifications in ownership structures than previous literature on ownership and performance has used. The results are contrary to the widely held belief that shareholder ownership is superior to stakeholder ownership in banking. There are no significant differences in profitability across ownership classes. Cooperatives and publicly owned savings banks outperform commercial retail banks in terms of cost efficiency and loan losses. There is some heterogeneity within the stakeholder-owned banks.

Selectivity and Transparency in Social Banking: Evidence from Europe

“…(1), (2), and (3), we regress DTA, IIS, and LMD on the dummy for SBs and we control for year, country, and size (proxied by the log of total assets). We also control for the legal status (by having a dummy for cooperative and savings banks), as the literature increasingly stresses differences between stakeholder-and shareholder-oriented banks in terms of performance, balance sheet structure, lending behavior, and contribution to financial stability (Angelini et al 1998;Hesse and Cihac 2007;Ferri et al 2015).…”

Social Capital and Credit Cooperative Banks

“…These banks are of particular interest in this context because: (1) they promote financial inclusion among groups that would otherwise be discriminated against in the financial markets; (2) they are able to include these groups by utilizing the relational ties between their members; and (3) they require relatively high levels of social capital in order to sustain themselves and grow (Banerjee et al ., ; Angelini et al ., ; Fischer, ; Ghatak and Guinnane, ). Financial cooperatives are timely because many studies on the first period of the current crisis have argued that they have performed better than conventional banks (Boonstra and Mooij, ; Birchall, ; Ferri et al ., , ; Klinedinst, ). This paper contributes to the relatively small but growing literature on the relationship between cooperatives and social capital.…”

Is there a relation between capital and ownership on bank performance? The German and Italian cases

“…In particular, cooperatives exhibit comparable or slightly superior earnings compared to commercial banks in Germany, Italy and Spain. Ferri et al (2015) study the impact of ownership structure on performance (in terms of profitability, loan quality, and cost efficiency) in European banking both prior to and during the recent crisis. The findings on SHV banks show better profitability before the crisis but not in terms of loan quality, with STK banks having higher loan quality before and during the crisis.…”

“…The importance of analysing countries with similar organisation systems should not be undervalued because it can bias the interpretation of results. Cooperative banks, in turn, differ significantly in their degree of integration (Ferri et al, 2015). The different degree of integration should in turn affect bank activity and thus performance differently.…”

“…Cihák and Hesse (2007) find that cooperative banks are less profitable in terms of ROA and are less capitalised in terms of equity to total assets than are commercial peers. Ferri et al (2015) find lower profitability and cost efficiency for stakeholder (STK) banks but not in terms of loan quality using a panel of Euro15 including the financial crisis year.…”