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Ownership Structure, Charter Value, and Risk-Taking Behavior for Thrifts

Author

Listed:
  • A. Sinan Cebenoyan
  • Elizabeth S. Cooperman
  • Charles A. Register
Abstract
This paper investigates the relationships among manager ownership, charter value, and thrift risk-taking for 1986 to 1995, a decade of significant regulatory change. We hypothesize that during periods of regulatory laxity and low charter values, manager-owned thrifts are likely to engage in unprofitable risk-taking. However, for periods of regulatory efficacy and high charter values, manager-owners are likely to engage in profitable risk-taking. In support of these premises, we find that manager-owned thrifts exhibit unprofitable risk-taking in the mid-1980s, years of regulatory laxity and low charter values, but demonstrate profitable risk-taking in the mid-1990s, a period of more stringent regulations and high charter values.

Suggested Citation

  • A. Sinan Cebenoyan & Elizabeth S. Cooperman & Charles A. Register, 1999. "Ownership Structure, Charter Value, and Risk-Taking Behavior for Thrifts," Financial Management, Financial Management Association, vol. 28(1), Spring.
    • Handle: RePEc:fma:fmanag:cehenoyan99
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    Cited by:

    1. Cook, Douglas O. & Hogan, Arthur & Kieschnick, Robert, 2004. "A study of the corporate governance of thrifts," Journal of Banking & Finance, Elsevier, vol. 28(6), pages 1247-1271, June.
    2. Sun Eae Chun & Mamoru Nagano & Min Hwan Lee, 2011. "Ownership Structure and Risk‐taking Behavior: Evidence from Banks in Korea and Japan," Asian Economic Journal, East Asian Economic Association, vol. 25(2), pages 151-175, June.
    3. Vuslat Us, 2017. "A dynamic approach to analysing the effect of the global crisis on nonperforming loans: evidence from the Turkish banking sector," Applied Economics Letters, Taylor & Francis Journals, vol. 24(3), pages 186-192, February.
    4. Robert DeYoung & Kenneth Spong & Richard J. Sullivan, 1999. "Who's minding the store? motivating and monitoring hired managers at small, closely held firms: the case of commercial banks," Working Paper Series WP-99-17, Federal Reserve Bank of Chicago.
    5. Chalermchatvichien, Pichaphop & Jumreornvong, Seksak & Jiraporn, Pornsit, 2014. "Basel III, capital stability, risk-taking, ownership: Evidence from Asia," Journal of Multinational Financial Management, Elsevier, vol. 28(C), pages 28-46.
    6. Landskroner, Yoram & Paroush, Jacob, 2008. "Bank management and market discipline," Journal of Economics and Business, Elsevier, vol. 60(5), pages 395-414.
    7. Gorton, Gary & Winton, Andrew, 2003. "Financial intermediation," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 8, pages 431-552, Elsevier.
    8. Rubi Ahmad & M. Ariff & Michael Skully, 2008. "The Determinants of Bank Capital Ratios in a Developing Economy," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 15(3), pages 255-272, December.
    9. Anderson, Ronald C. & Fraser, Donald R., 2000. "Corporate control, bank risk taking, and the health of the banking industry," Journal of Banking & Finance, Elsevier, vol. 24(8), pages 1383-1398, August.
    10. Us, Vuslat, 2017. "Dynamics of non-performing loans in the Turkish banking sector by an ownership breakdown: The impact of the global crisis," Finance Research Letters, Elsevier, vol. 20(C), pages 109-117.
    11. Enrico Onali, 2014. "Moral Hazard, Dividends, and Risk in Banks," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 41(1-2), pages 128-155, January.
    12. Uchida, Hirofumi & Satake, Mitsuhiko, 2009. "Market discipline and bank efficiency," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(5), pages 792-802, December.
    13. García-Kuhnert, Yamileh & Marchica, Maria-Teresa & Mura, Roberto, 2015. "Shareholder diversification and bank risk-taking," Journal of Financial Intermediation, Elsevier, vol. 24(4), pages 602-635.
    14. DeYoung, Robert & Spong, Kenneth & Sullivan, Richard J., 2001. "Who's minding the store? Motivating and monitoring hired managers at small, closely held commercial banks," Journal of Banking & Finance, Elsevier, vol. 25(7), pages 1209-1243, July.
    15. Tai, Vivian W. & Lai, Yi-Hsun & Lin, Lin, 2014. "Local institutional shareholders and corporate hedging policies," The North American Journal of Economics and Finance, Elsevier, vol. 28(C), pages 287-312.
    16. Westman, Hanna, 2011. "The impact of management and board ownership on profitability in banks with different strategies," Journal of Banking & Finance, Elsevier, vol. 35(12), pages 3300-3318.
    17. W. Scott Frame & Lawrence J. White, 2007. "Charter Value, Risk-Taking Incentives, and Emerging Competition for Fannie Mae and Freddie Mac," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(1), pages 83-103, February.
    18. Shams Pathan & Mamiza Haq & Barry Williams, 2016. "Does skin in the game help? Bank franchise value, managerial incentives and ‘going for broke’," Australian Journal of Management, Australian School of Business, vol. 41(2), pages 271-298, May.
    19. Harilaos F. Harissis & George E. Makrivogiatzakis & Stavros E. Arvanitis, 2013. "Risk Assessment in the Context of Internal Audit in Greek Listed Companies at Athens Stock Exchange," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 14-37.
    20. Sullivan, Richard J. & Spong, Kenneth R., 2007. "Manager wealth concentration, ownership structure, and risk in commercial banks," Journal of Financial Intermediation, Elsevier, vol. 16(2), pages 229-248, April.
    21. Walter Dolde & John Knopf, 2010. "Insider Ownership, Risk, and Leverage in REITs," The Journal of Real Estate Finance and Economics, Springer, vol. 41(4), pages 412-432, November.
    22. Bowo Setiyono & Amine Tarazi, 2014. "Disclosure, ownership structure and bank risk: Evidence from Asia," Working Papers hal-00947590, HAL.
    23. Forssbæck, Jens, 2011. "Ownership structure, market discipline, and banks' risk-taking incentives under deposit insurance," Journal of Banking & Finance, Elsevier, vol. 35(10), pages 2666-2678, October.
    24. Jiang Cheng & Elyas Elyasiani & Jingyi (Jane) Jia, 2011. "Institutional Ownership Stability and Risk Taking: Evidence from the Life-Health Insurance Industry," NFI Working Papers 2011-WP-14, Indiana State University, Scott College of Business, Networks Financial Institute.

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