Risk-taking behavior in the U.S. thrift industry: Ownership structure and regulatory changes

Knopf, John D.; Teall, John L.

doi:10.1016/0378-4266(96)00010-6

Cited by 63 publications

(24 citation statements)

References 15 publications

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“…The likelihood of surviving the thrift crisis increases with unitary leadership (CEO is chair), and with the percentage of block ownership, consistent with the results of Knopf and Teall (1996). Somewhat unexpectedly, none of our measures of executive share ownership affect the likelihood of survival.…”

Section: Logistic Regressionssupporting

confidence: 79%

Are two heads better than one? Evidence from the thrift crisis

Byrd

Fraser

Lee

et al. 2012

Journal of Banking & Finance

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a b s t r a c tWe employ a natural experiment from the 1980s, predating the ubiquitous clamor for independence influenced corporate governance structures, to examine which governance mechanisms are associated with firm survival and failure. We find that thrifts were more likely to survive the thrift crisis when their CEO also chaired the firm's board of directors. On average, chair-holding CEOs undertook less aggressive lending policies than their counterparts who did not chair their boards. Consequently, taxpayer interests were protected by thrifts that bestowed both leadership posts to one person. This is an important policy issue, because taxpayers become the residual claimants for depository institutions that fail as a result of managers adopting risky strategies to exploit underpriced deposit insurance. Our findings corroborate recent evidence that manager-dominated firms resist shareholder pressure to adopt riskier investment strategies to exploit underpriced deposit insurance.

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Section: Logistic Regressionssupporting

confidence: 79%

Are two heads better than one? Evidence from the thrift crisis

Byrd

Fraser

Lee

et al. 2012

Journal of Banking & Finance

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“…Previous studies in banking literature have made different assumptions on the wealth diversification of bank shareholders, often finding contrasting results (e.g. Saunders et al, 1990;Anderson and Fraser, 2000;Knopf and Teall, 1996;Barry et al, 2011;Laeven and Levine, 2009). Evidence in corporate finance literature shows that the average investor in the non-financial sector is only moderately diversified (e.g.…”

Section: Introductionmentioning

confidence: 99%

“…Barry et al, 2011;Erkens et al, 2012;Cheng et al, 2015). On the other hand, Knopf and Teall (1996) and Cebenoyan et al (1999) show an inverse relationship between risk-taking and the level of institutional shareholding. Further, banks and insurance companies are also assumed to be well diversified shareholders.…”

mentioning

confidence: 97%

Shareholder diversification and bank risk-taking

García-Kuhnert¹,

Marchica²,

Mura³

2015

Journal of Financial Intermediation

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a b s t r a c tUsing the entire universe of Bankscope and Amadeus Top 250,000 we construct the portfolios of shareholders who hold equity stakes in publicly traded and privately held European banks for each year over the period [1999][2000][2001][2002][2003][2004][2005][2006][2007][2008]. We show that about 62% of banks' ultimate largest shareholders are diversified investors, holding on average equity investments from thirteen companies in their portfolio. We exploit this heterogeneity to investigate the impact of their portfolio diversification on bank risk-taking. Our results show that banks with more diversified shareholders undertake more risks. This relation is both statistically significant and economically sizeable. Overall, these findings contribute to the literature by studying for the first time a specific channel through which financial development, in the form of bank shareholders' diversification, affects the banks' risk-taking decisions.

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“…Their results are consistent with earlier SCP studies, indicating that mutual S&Ls invest a high proportion of assets in loans and "source" a higher proportion of liabilities from deposits. Knopf and Teall (1996) examine the impact of ownership and regulation-the Financial Institutions and Reform and Recovery and Enforcement Act of 1989 (FIRREA)-on risk-taking behavior in the US thrift industry. This was a period of re-regulation aiming to increase capital ratios, regulate the use of brokered CDs and minimize real estate equity holdings.…”

Section: A Brief Overview Of Research On Market Concentration Competmentioning

confidence: 99%

Financial Services Consolidation and Performance in New York State Savings and Loan Associations, 2000-2011

Doyran¹

2012

IJEF

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The market structure-performance relationship has been tested for US banking in industrial organization studies. Two divergent hypotheses with regard to this relationship are the Structure-Conduct-Performance (SCP) Paradigm and Efficient Structure Hypothesis (ESH). This paper presents the test results of both hypotheses with respect to the New York State S&L associations using the time-series and cross sectional (firm-level) data for the most recent period 2000-2010. The results of PEGLS regression indicate that performances of S&Ls vary with respect to operating cost, credit risk and capitalization. Neither market share nor concentration, however, plays a significant role in explaining profitability. The results partially support the ESH as an explanation for the market behavior of New York State S&L associatons. Given that profitable banks are efficient but also risk dependent, additional policies are warranted in order to mitigate risk and maintain the safety and soundness for the remaining S&Ls in the New York State.

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Risk-taking behavior in the U.S. thrift industry: Ownership structure and regulatory changes

Cited by 63 publications

References 15 publications

Are two heads better than one? Evidence from the thrift crisis

Are two heads better than one? Evidence from the thrift crisis

Shareholder diversification and bank risk-taking

Financial Services Consolidation and Performance in New York State Savings and Loan Associations, 2000-2011

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