Jens Forssbaeck
Associate professor, Programme director – Master of Finance
Ownership structure, market discipline, and banks' risk-taking incentives under deposit insurance
Author
Summary, in English
The paper studies the effects of market discipline by creditors and ownership structure on banks' risk taking in the presence of partial deposit insurance. An agency-cost model explains how the effects of creditor discipline and shareholder control arc interdependent, the non-monotonic effect of shareholder control, and the role of leverage. Panel regressions on several hundred banks worldwide 1995-2005 confirm a negative individual risk effect of creditor discipline and the expected convex effect of shareholder control. Increased shareholder control significantly strengthens the negative effect of market discipline on asset risk, but joint effects on overall default risk are limited. (C) 2011 Elsevier B.V. All rights reserved.
Department/s
- Institute of Economic Research
Publishing year
2011
Language
English
Pages
2666-2678
Publication/Series
Journal of Banking & Finance
Volume
35
Issue
10
Document type
Journal article
Publisher
Elsevier
Topic
- Economics and Business
Keywords
- Bank risk
- Market discipline
- Ownership structure
- Deposit insurance
Status
Published
ISBN/ISSN/Other
- ISSN: 1872-6372