Risk Taking Behavior in the Us Thrift Industry: Ownership Structure and Regulatory Changes

Posted: 17 May 1998

See all articles by John D. Knopf

John D. Knopf

University of Connecticut - Department of Finance

John L. Teall

Pace University - Lubin School of Business

Date Written: Undated

Abstract

The paper is concerned with the relationship between ownership structure and risk-taking in the US thrift industry along with the impact of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) on this relationship. Our results, based on balance sheet and market measures of risk, suggest that insider controlled thrifts were more likely to engage in risk-taking behavior prior to 1989 than were diversely held institutions. FIRREA seems to have curtailed much of the risk-taking behavior of these institutions; in fact, some evidence suggests that inside controlled thrifts may have actually engaged in less risk-taking behavior than their diversely held counterparts after 1989. We find inverse relationships between risk- taking behavior and levels of institutional shareholdings during all periods. This finding, along with the finding that increased risk-taking does not increase returns to thrift shareholders, suggests that the motive for risk- taking behavior on the part of insider held thrifts may not have been the maximization of the "option" value associated with shares as reported elsewhere.

JEL Classification: G20

Suggested Citation

Knopf, John D. and Teall, John L., Risk Taking Behavior in the Us Thrift Industry: Ownership Structure and Regulatory Changes (Undated). Available at SSRN: https://ssrn.com/abstract=7195

John D. Knopf (Contact Author)

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States

John L. Teall

Pace University - Lubin School of Business ( email )

1 Pace Plaza
New York, NY 10038-1502
United States
Not available (Phone)
Not available (Fax)

HOME PAGE: http://webpage.pace.edu/jteall

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
1,084
PlumX Metrics