Jens Forssbaeck

Docent, Programchef - Masterprogram i finans

Ownership structure, market discipline, and banks' risk-taking incentives under deposit insurance

Författare

Jens Forssbaeck

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.

Avdelning/ar