Too dispersed to monitor? Ownership dispersion, monitoring and the prediction of bank distress

Brossard, Olivier and Auvray, Tristan (2012) Too dispersed to monitor? Ownership dispersion, monitoring and the prediction of bank distress. Journal of Money, Credit and Banking, 44 (4).

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Abstract

This paper conducts an empirical assessment of the theories stating that ownership concentration improves the quality of shareholders' monitoring. In contrast with other studies, we do not use regressions of risk/performance on ownership concentration. Instead, we build an early warning model of bank distress that includes a leading indicator derived from banks' share price, the Merton-KMV distance to default (DD). The significance of this indicator depends on the efficacy of shareholders' monitoring. On a sample of European banks, we show that the predictive power of the DD is satisfactory only when banks' shareholding is characterized by the presence of blockholders.

Item Type: Article
Language: English
Date: June 2012
Refereed: Yes
Uncontrolled Keywords: Monitoring, Ownership concentration, Block ownership, Bank distress, Early warning models
Subjects: B- ECONOMIE ET FINANCE > B5- Finances
Divisions: Laboratoire d'études et de recherches sur l'économie, les politiques et les systèmes sociaux - LEREPS
Site: IEP
Date Deposited: 23 Jan 2013 12:41
Last Modified: 26 May 2016 16:18
URI: http://publications.sciencespo-toulouse.fr/id/eprint/10269

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