TY - JOUR
T1 - Concentrated control, institutions, and banking sector
T2 - An international study
AU - Haw, In Mu
AU - Ho, Simon S.M.
AU - Hu, Bingbing
AU - Wu, Donghui
N1 - Funding Information:
This paper was originally submitted to Professor Giorgio Szego on November 4, 2007 and was revised once prior to submission through EES. We are especially grateful to the anonymous referee for the helpful and constructive comments. We appreciate helpful comments from Ike Mathur (the editor), conference participants at the European Accounting Association Annual Congress 2008, and workshop participants at Institute for Financial and Accounting Studies of Xiamen University. We also thank Jinshuai Hu for his research assistance. Bingbing Hu acknowledges the financial support of Faculty Research Grant of Hong Kong Baptist University.
PY - 2010/3
Y1 - 2010/3
N2 - 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.
AB - 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.
KW - Bank operations
KW - Bank regulations
KW - Concentrated control
KW - Legal institutions
UR - http://www.scopus.com/inward/record.url?scp=74149087998&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2009.08.013
DO - 10.1016/j.jbankfin.2009.08.013
M3 - Journal article
AN - SCOPUS:74149087998
SN - 0378-4266
VL - 34
SP - 485
EP - 497
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
IS - 3
ER -