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

Chalermchatvichien, Pichaphop; Jumreornvong, Seksak; Jiraporn, Pornsit; Singh, Manohar

doi:10.1007/s10693-013-0160-8

Cited by 47 publications

(33 citation statements)

References 32 publications

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“…*** Significant at 1% Table 4). Following Chalermchatvichien et al (2014), we estimate the Altonji ratio as βF-(βR -βF), where βF and βF are respectively the coefficients of the restricted and of the full models. IND is the proportion of the independent board directors; BS is the number of boards of directors; BM is the number of the meetings held by the board during the fiscal year; CRF is a dummy variable which assumes a value equal to 1 if the cash-flow rights of the largest ultimate shareholder are greater than 10% and 0 otherwise (cut-offs at 10%).…”

Section: Discussionmentioning

confidence: 99%

“…As to the reverse causality, we relate bank corporate governance variables in the earliest year of the sample (2006) to bank risk in the subsequent years, as in many governance studies (e.g. Erkens et al, 2012;Beltratti and Stulz, 2012;Chalermchatvichien et al 2014). …”

Section: < Insert Table 8>mentioning

confidence: 99%

“…Following Chalermchatvichien et al (2014), we use the Altonji ratio (Altonji et al, 2005) to estimate the potential bias generated by unobservables. In particular, the ratio calculates how large selection on unobservables would need to be in order to attribute the entire effect (OLS estimates) to selection bias.…”

Section: < Insert Table 8>mentioning

confidence: 99%

“…Moreover, our corporate governance proxies are taken at the year preceding our investigated period. To control for the possibility of omitted variable bias we exploit the insight from Altonji et al(2005), as in Chalermchatvichien et al (2014), and find that the endogeneity bias is more unlikely in our results.…”

Section: Introductionmentioning

confidence: 99%

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Strong boards, ownership concentration and EU banks’ systemic risk-taking: Evidence from the financial crisis

Battaglia

Gallo

2017

Journal of International Financial Markets, Institutions and Mo

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This is the accepted version of the paper.This version of the publication may differ from the final published version. Keywords: board composition; bank ownership; systemic risk; financial crisis JEL classification: G01; G21; G32 Permanent repository link IntroductionCorresponding authorThe role of corporate governance in banking has been highlighted by academics as well as by regulators and policy makers (see e.g. Basle Committee on Banking Supervision, 2010;Organization for Economic Co-operation and Development, 2010). Many academic studies emphasize how flaws in bank governance played a key role in the performance of banks during the crisis (Diamond and Rajan, 2009;Bebchuk and Spamann, 2010, Beltratti andStulz, 2012). Since the 2007, an increasing number of proposals and initiatives have attempted to identify and mitigate these flaws revealed by the financial crisis (Kirkpatrick, 2009) aiming to promote better corporate governance standards in banking, while recognizing the special nature of banks when compared to other firms. On the other hand, the financial crisis revealed the dramatic impact of excessive risktaking behaviour of banks on the global financial stability, especially in terms of underestimated consequences of unregulated systemic risk-taking. As the literature has widely investigated poor or weak corporate governance as well as the increasing systemic nature of the banking sector as major causes of the crisis, to the best of our knowledge there is still a limited understanding of the relationship between corporate governance characteristics and banks' incentive to become more expose to systemic risk. As suggested by de Andres and Vallelado (2008), the aim of banking regulators to reduce the runs and their systemic consequences on the stability of the system might come into conflict with the main purpose of shareholders which is to improve the shareholders value by also increasing risk-taking. Taking on risks and tail and systemic risks, in particular, may enhance bank performance in the short run (i.e. by increasing the leverage), but it can cause significant damage to the institution and the whole system when such risks materialize (i.e. fire sales "effects"). During the global financial crisis, European banks exposed themselves to tail and systemic risks in various ways. Among others, the most recent literature has highlighted how European banks' exposures to tail risks in the form of shadow banking activities were later transformed into severe losses on the balance sheets (Acharya et al., 2013: Arteta et al., 2013).An increase in systemic and tail risks by large banks could be supported by the implicit too-big-to fail guarantee and the reduced market discipline (Acharya et al.,2010). In fact, it could be difficult, both for outsiders and insiders, to distinguish between risk-taking activities that generate high returns and those that offer high returns as compensation for taking tail risk through complex and opaque activities (Ellul and Yerramilli, 2013). In this context, the presence of a s...

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Section: Discussionmentioning

confidence: 99%

Section: < Insert Table 8>mentioning

confidence: 99%

Section: < Insert Table 8>mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Strong boards, ownership concentration and EU banks’ systemic risk-taking: Evidence from the financial crisis

Battaglia

Gallo

2017

Journal of International Financial Markets, Institutions and Mo

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show abstract

“…For example, Chalermchatvichien et al (2014) proved that concentrated ownership is a determinant of capital adequacy ratio (Capital Adequacy Ratio) and liquidity of banks. In addition, the possible effects of Basel III can also create the costs, benefits, and the consequence is that this needs to be discussed again and again.…”

Section: Introductionmentioning

confidence: 99%