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Ownership Structure·Governance, Firm Performance and Risk taking of the Mutual Saving Banks in Korea

  • Journal of Insurance and Finance
  • 2008, 19(3), pp.229-261
  • Publisher : Korea Insurance Research Institute
  • Research Area : Social Science > Business Management

전선애 1,  이민환 2

1중앙대학교
2보험연구원

Accredited

ABSTRACT

Savings bank in korea differs from the commercial banks in that the ownership structure is more concentrated and major shareholder often takes part in the management directly or indirectly. We analyze the effect of ownership structure and governance on the performance and riskiness of the savings banks in Korea, by looking at each cases where the percentage share of major shareholders exceed 50%, where the major shareholders are the corporate entity or individual, or the ownership and management separated. Panel regression methodology is employed. ROA, operating costs and interest margin are employed to measure the bank performance. Various measure of non performing loans are used to measure the riskiness of assets. We find that the banks with concentrated ownership exhibit more robust firm performance with higher profitability and lower costs. On the other hand we observe the positive bank performance when shareholders are corporate entities. The concentrated ownership make low the riskiness of the banks with expected default frequency(EDF). This paper concludes that concentrated ownership of the saving banks in Korea has favorable effect on the bank performance with lower riskiness and conjecture this to be the case due to the responsible management activity taken by the major shareholders. The agency theory does not apply in savings banks where the managers tend to take unprofitable risks.

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