Ownership structure and bank risk-taking in ASEAN countries: A quantile regression approach

Abstract

This study examines the effect of ownership structure on the risk-taking behavior of banks in ASEAN countries. Using a sample of 96 commercial banks in ASEAN countries from 2002 to 2018, the study demonstrates that the relationship between ownership structure and bank risk-taking behavior is correlated with the characteristics of individual banks in terms of quantile regression. First, state ownership and foreign ownership affect bank risk-taking positively in high-risk banks while negatively in low-risk banks. Second, the relationship between ownership concentration and risk-taking is negative in all distributions of bank risk. These findings suggest that appropriate ownership structure can constrain bank risk-taking activities in accordance with the level of risk of each bank.

Keywords:

• ownership structure
• bank risk-taking
• quantile regression

Jel classification:

• G21
• G28
• G30
• G32
• G33
• G38

PUBLIC INTEREST STATEMENT

Bank risk is a major concern of bank regulators, bank shareholders, and the public at large because of the potential contagion across the financial sector and the possible consequent meltdown of the financial system. One of the mechanisms to control bank risk-taking is finding an appropriate ownership structure. Literature about the effect of ownership structure on bank risk is the assumption that there is an optimal ownership structure that is common to all banks. This study investigates the hypothesis that there is no optimal ownership structure for all banks. By using the quantile regression technique, this study finds that the relationship between ownership structure and bank risk-taking behavior is correlated with the characteristics of individual banks in terms of quantile regression. Our study is of interest to policymakers and bank shareholders since it provides an understanding of the relationship between ownership structure and bank risk-taking.

Acknowledgement

The author would like to thank the editor and other anonymous reviewers for constructive comments and suggestions. We also thank Dr Phu Quoc Pham (University of Economics Ho Chi Minh City) and Dr Chau Le Ho An (University of Lincoln) for all support. Special thanks are also due to an anonymous reviewer of the journal for helpful ideas towards improving the quality of the paper.

Additional information

Funding

The author received no direct funding for this research.

Notes on contributors

Quang Khai Nguyen

Quang Khai Nguyen is a researcher at School of Banking, University of Economics Ho Chi Minh City (UEH). His research covers a variety of topics related to financial institutions and empirical corporate finance and banking, including capital structure, corporate governance, risk taking behaviors, earnings management, bank stability