Too Dispersed to Monitor ? Ownership Dispersion, Monitoring, and the Prediction of Bank Distress - Archive ouverte HAL Access content directly
Journal Articles Journal of Money, Credit and Banking Year : 2012

Too Dispersed to Monitor ? Ownership Dispersion, Monitoring, and the Prediction of Bank Distress

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.

Dates and versions

hal-01372475 , version 1 (27-09-2016)

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Tristan Auvray, Olivier Brossard. Too Dispersed to Monitor ? Ownership Dispersion, Monitoring, and the Prediction of Bank Distress. Journal of Money, Credit and Banking, 2012, 44 (4), pp.685-714. ⟨10.1111/j.1538-4616.2012.00506.x⟩. ⟨hal-01372475⟩

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