Ownership Structure, Deregulation, and Bank Risk Taking





    Search for more papers by this author
    • Saunders is Professor of Finance, Graduate Business School, New York University and Research Advisor, Federal Reserve Bank of Philadelphia. Strock and Travlos are Assistant Professors of Finance, Wallace E. Carroll School of Management, Boston College. The authors would like to thank Linda Allen, Yakov Amihud, George Aragon, Mitch Berlin, James Brickley, Chris James, Lucille Mayne, Loretta Mester, John G. Preston, Steve Raymar, Ithzak Swary, Greg Udell, and Jerry Viscione and would like to acknowledge the helpful comments of two anonymous referees. This study was completed while Strock was the recipient of a Boston College Research Fellowship. Saunders would like to acknowledge financial support provided by a Salomon Brothers Fellowship, a Bank and Financial Analysts Fellowship, and a Senior Yamaichi Research Fellowship. Travlos acknowledges financial support from the Boston College Research Council. The research assistance of Avi Peled and Jean Lee is gratefully appreciated.


This paper investigates the relationship between bank ownership structure and risk taking. It is hypothesized that stockholder controlled banks have incentives to take higher risk than managerially controlled banks and that these differences in risk become more pronounced in periods of deregulation. In support of this hypothesis, we show that stockholder controlled banks exhibit significantly higher risk taking behavior than managerially controlled banks during the 1979–1982 period of relative deregulation.