The impact of minority foreign ownership and controlling shareholder on bank risk and performance

Ruth Tacneng (LAPE department. Université de Limoges, Limoges, France)

Managerial Finance

ISSN: 0307-4358

Publication date: 11 May 2015

Abstract

Purpose

The purpose of this paper is to examine the impact of minority foreign ownership on the risk taking behavior and performance of domestic banks in a country where foreign ownership restrictions are imposed.

Design/methodology/approach

Mainly controlled by family business groups, the authors examine the extent by which the presence and the level of foreign ownership and voting rights affect domestic bank behavior.

Findings

The results show that compared with those purely domestic-owned, banks with foreign shareholdings have lower levels of insider lending and have higher loan portfolio quality. Moreover, the authors find an increase in foreign voting rights effective in raising risk-adjusted returns and in lowering default risk. This positive effect on performance, however, ceases at higher levels of control manifested by the majority domestic shareholder.

Research limitations/implications

Overall, this study shows that there are significant benefits derived from minority foreign shareholder presence in Philippine domestic banks.

Originality/value

This paper contributes to the debate of whether it may be beneficial to reduce or completely lift the foreign ownership restrictions imposed on the banks in the country.

Keywords

Citation

Ruth Tacneng (2015) "The impact of minority foreign ownership and controlling shareholder on bank risk and performance", Managerial Finance, Vol. 41 No. 5, pp. 526-546

Download as .RIS

DOI

: https://doi.org/10.1108/MF-06-2013-0137

Publisher

:

Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited

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