Ownership Structure, Risk and Performance in the European Banking Industry

By Giuliano Iannotta, Giacomo Nocera, A. Sironi. 2007

1,067 citations recorded by the source corpus.

We compare the performance and risk of a sample of 181 large banks from 15 European countries over the 1999-2004 period and evaluate the impact of alternative ownership models, together with the degree of ownership concentration, on their profitability, cost efficiency and risk. Three main results emerge. First, after controlling for bank characteristics, country and time effects, mutual banks and government-owned banks exhibit a lower profitability than privately owned banks, in spite of their lower costs. Second, public sector banks have poorer loan quality and higher insolvency risk than other types of banks while mutual banks have better loan quality and lower asset risk than both private and public sector banks. Finally, while ownership concentration does not significantly affect a bank's profitability, a higher ownership concentration is associated with better loan quality, lower asset risk and lower insolvency risk. These differences, along with differences in asset composition and funding mix, indicate a different financial intermediation model for the different ownership forms.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/8c480f49727d6ac78a2ec35c9c643b20a0efd93b

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Citations in the corpus

Competition and Financial Stability in European Cooperative Banks (2014, background): “productive performance related to the technological development (Kontolaimou and Tsekouras, 2010), the performance and risk depending on the ownership structure (Iannotta et al., 2007) and cost efficiency and financial structure (Girardone et al.”
Bank performance in China: A Perspective from Bank efficiency, risk-taking and market competition (2019, result): “To be more specific, The ratio of non-performing loans to total loans measures the credit risk, the higher figure of this ratio indicates higher credit risk, the ratio of liquid assets to total assets measures the liquidity risk, the higher figure of this ratio shows that the bank has lower liquidit”
The effect of credit risk, liquidity risk and bank capital on bank profitability: Evidence from an emerging market (2020, background): “Iannotta et al. (2007) found a positive and important relationship between capital and bank profitability.”
A comprehensive analysis of the effects of risk measures on bank efficiency: Evidence from emerging Asian countries (2011, background): “Iannotta et al. (2007) use loan loss as a proxy for both asset quality and risk to compare the performance and risk of a sample of 181 large banks from 15 European countries over the 1999-2004 period.”
Ownership concentration and bank profitability (2017, neutral): “Iannotta, Nocera, and Sironi (2007) investigate the relationship between ownership structure, risk taking and bank performance for 181 European banks during the 1999–2004 period.”
Ownership Structure and Risk-Taking: Comparative Evidence from Private and State-Controlled Banks in China (2014, background): “structure is ownership concentration (Iannotta et al., 2007).”
Bank risk and performance in the MENA region: The importance of capital requirements (2016, neutral): “For instance, a risky bank with higher performance may have an important influence on the regulatory policies, for example the Basel Accords’ capital guidelines, in the sense of being more indulgent to the development and growth of the bank.”
Determinants of Bank Profitability Before and During the Crisis: Evidence from Switzerland (2011, background): “According to the results of Bourke (1989) and Molyneux and Thornton (1992), the bank concentration ratio shows a positive and statistically significant relationship with the profitability of a bank and is, therefore, consistent with the traditional structure-conduct-performance paradigm. In contrast”
Determinants of bank profitability in transition countries: What matters most? (2016, background): “others show that ownership impacts on profitability (Iannotta et al., 2007; Micco et al., 2007).”
CEO Power, Government Monitoring, and Bank Dividends (2016, methodology): “25 These results are somewhat consistent with the ﬁndings reported by Iannotta et al. (2007) , who ﬁnd that in Europe government-owned banks do not outperform privately-owned banks.”
Vive la Différence: Social Banks and Reciprocity in the Credit Market (2013, neutral): “Ferri et al. (2010) and Iannotta et al. (2007) show that financial cooperatives tend to be better capitalized than commercial retail banks.”
What Determines the Profitability of Banks? Evidence from Spain (2013, neutral): “…an inverse relationship between liquidity and profitability— are Abreu and Mendes (2002), Angbazo (1997), Barros et al. (2007), Chiorazzo et al. (2008), DeYoung and Rice (2004), Goddard et al. (2004a), Iannotta et al. (2007), Molyneux and Thornton (1992), and Pasiouras and Kosmidou (2007).”
Performance and trade-offs in microfinance organisations--does ownership matter? (2008, background): “In a recent large European study Iannotta et al. (2007) found that investor owned banks have higher profitability, but have higher operating costs than non-investor owned banks.”
Factors influencing bank risk in Europe: Evidence from the financial crisis (2015, background): “2 An evaluation of the impact of alternative ownership models, together with the degree of ownership concentration, on risk and profitability of European banks is provided by Iannotta et al. (2007).”
The profitability of banks in Japan (2010, neutral): “Only a handful of studies have assessed the extent to which the profitability of banks differs across ownership type.3 For example in Europe, see Goddard et al. (2004a, b), Ianotta et al. (2007) and Beck et al. (2009).”