http://dx.doi.org/10.1016/j.jbankfin.2009.08.013">
 

Document Type

Journal Article

Department/Unit

Department of Accountancy and Law

Title

Concentrated control, institutions, and bank operations: An international study

Language

English

Abstract

Using a broad sample of listed commercial banks in East Asia and Western Europe, this paper investigates the relations among concentrated control, a set of bank operating characteristics, and legal and regulatory regimes. We find that banks with concentrated control exhibit poorer performance, lower cost efficiency, greater return volatility, and higher insolvency risk, relative to widely held ones. We also document that legal institutions and private monitoring effectively reduce the detrimental effects of concentrated control and that official disciplinary power plays a weak governance role, whereas government intervention exacerbates the adverse effects. Further evidence shows that the relations between control concentration and bank operating characteristics are curvilinear and vary according to the types of controlling owners. Overall, our findings support the contention that country-level institutions play important roles in constraining insider expropriation, and that private monitoring mechanisms are more effective than are public rules and supervision in governing banks. © 2009 Elsevier B.V. All rights reserved.

Keywords

Bank operations, Bank regulations, Concentrated control, Legal institutions

Publication Date

2010

Source Publication Title

Journal of Banking and Finance

Volume

34

Issue

3

Start Page

485

End Page

497

Publisher

Elsevier

ISSN (print)

03784266

ISSN (electronic)

18726372

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