Impact of ownership structure on risk-taking behavior of South Asian banks

Abstract

The implementation of an effective risk management policy is necessary for the survival and success of banks. Ownership structure changes the risk-taking behavior of banks. Therefore, we analyze the impact of the ownership structure on risk-taking behavior of banks in emerging markets (i.e., Pakistan, India, and Bangladesh). We take public, private and foreign ownership of banks in this study. We collect the data from 64 banks of selected countries from 2011 to 2018. We measure risk-taking as capital adequacy, leverage coverage ratio, non-performing loan ratio, and return volatility. We use two-step system dynamic panel estimation for analyzing the results. We find that public and private banks have significant relationship with the risk-taking of banks. Furthermore, public and private banks show more risk-taking behavior as compared to foreign banks in all selected countries.