Organizational form and risk taking in the savings and loan industry

Organizational form and risk taking in the savings and loan industry I hypothesize that risk taking is greater in stock thrifts than in mutual thrifts because the residual and fixed claims are separable. I find that stock thrifts exhibit greater profit variability during the 1982–1988 period and that conversions from mutual to stock ownership are associated with increased investment in risky assets and increased profit variability. These findings illustrate the relation between the structure of residual claims, incentives, and firm performance as well as the unintended consequences resulting from changes in thrift regulations. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Economics Elsevier

Organizational form and risk taking in the savings and loan industry

Journal of Financial Economics, Volume 44 (1) – Apr 1, 1997

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Publisher
Elsevier
Copyright
Copyright © 1997 Elsevier Ltd
ISSN
0304-405x
D.O.I.
10.1016/S0304-405X(96)00897-5
Publisher site
See Article on Publisher Site

Abstract

I hypothesize that risk taking is greater in stock thrifts than in mutual thrifts because the residual and fixed claims are separable. I find that stock thrifts exhibit greater profit variability during the 1982–1988 period and that conversions from mutual to stock ownership are associated with increased investment in risky assets and increased profit variability. These findings illustrate the relation between the structure of residual claims, incentives, and firm performance as well as the unintended consequences resulting from changes in thrift regulations.

Journal

Journal of Financial EconomicsElsevier

Published: Apr 1, 1997

References

  • Determinants of thrift institution resolution costs
    Barth, James R.; Bartholomew, Philip F.; Bradley, Michael G.
  • A case study of risk shifting in the savings and loan industry
    Esty, Benjamin C.
  • The effect of interest rate changes on the common: stock returns of financial institutions
    Flannery, Mark J.; James, Christopher M.
  • Guaranty funds and risk taking: Evidence from the insurance industry
    Lee, Soon-Jae; Mayers, David; Smith, Clifford W.
  • Ownership structure and control: The mutualization of stock life insurance companies
    Mayers, David; Smith, Clifford W.
  • Ownership structure, deregulation, and bank risk taking
    Saunders, Anthony; Strock, Elizabeth; Travlos, Nickolaos G.

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