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Institutional Ownership, Diversification, and Riskiness of Bank Holding Companies
Author(s) -
Deng Saiying,
Elyasiani Elyas,
Jia Jingyi
Publication year - 2013
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12008
Subject(s) - diversification (marketing strategy) , deregulation , business , institutional investor , financial system , revenue , monetary economics , finance , market economy , economics , corporate governance , marketing
We examine the relationship among the level and stability of institutional ownership, diversification, and riskiness of publicly traded bank holding companies. We find that large and stable institutional ownership is associated with a higher (lower) level of geographic, revenue, and nontraditional banking (asset) diversification and lower risk, suggesting that institutional investors are prudent and favor risk‐reducing diversification strategies. The association between institutional ownership level and diversification is more pronounced under deregulation and during the crisis, suggesting a substitution effect between regulation and market discipline, and a greater level of monitoring and/or advising by institutional investors during the crisis, respectively.