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The Influence of Managerial Ownership on Bank Market Value, Performance, and Risk: Evidence from Banks Listed on the Stoxx Global Index
Author(s) -
Gulamhussen Mohamed Azzim,
Pinheiro Carlos,
Sousa Rui
Publication year - 2012
Publication title -
journal of international financial management and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.818
H-Index - 37
eISSN - 1467-646X
pISSN - 0954-1314
DOI - 10.1111/j.1467-646x.2012.01056.x
Subject(s) - business , causality (physics) , agency (philosophy) , value (mathematics) , accounting , index (typography) , financial system , financial economics , monetary economics , economics , philosophy , physics , epistemology , quantum mechanics , world wide web , computer science , machine learning
Abstract We follow agency theory to assess the influence of managerial ownership on the market value, performance, and risk of 123 listed banks in 23 countries included in the STOXX G lobal I ndex in 2007 and 2010. After controlling for bank characteristics, regulatory restrictions, and macroeconomic conditions, our findings show a positive relation between managerial ownership and both market value ( T obin's Q ) and performance ( ROA and ROE ). Moreover, we find a negative relation between managerial ownership and risk ( EDF , NPL / L , and Z ‐ SCORE ). Bank market value and performance is a non‐linear, inverse U ‐shaped function of managerial ownership. The negative relation between managerial ownership and bank risk is also non‐linear and U ‐shaped. Our results remain robust to reverse causality. In their effort to immunize the global financial system from systemic risks, central banks and practitioners should find our results relevant for regulation purposes.