Relationship between bank ownership concentration on capital adequacy, liquidity, and capital stability in the listed banks in Tehran stock exchange

M.R. Vatanparast, H Behtooie
2016 Journal of Fundamental and Applied Sciences  
In this study we explore the effects of ownership concentration on the risk-taking behavior of banks. Our analysis focuses on East Asian countries because these nations have successfully implemented the Basel standards and have demonstrated a high degree of regulatory convergence. For the period from 2005 to 2009, we analyzed the relation between ownership concentration and capital adequacy (Basel II) and find that an increase in ownership concentration by one standard deviation results in an
more » ... provement in capital adequacy by 32%. Motivated by public policy considerations, we analyze the impact of bank ownership structure as a governance mechanism on capital adequacy and liquidity in Asian banks. The results show that as ownership concentration rises, banks become well capitalized and more liquid. The impact is both statistically and economically significant. Our results complement recent findings reported by Peni and Vahamaa (2011) that corporate governance mechanisms are material factors in explaining banks' behavior and their market performance. Our results also support Vauhkonen's (2011) findings that market discipline manifested through ownership concentration significantly impacts banks' capital adequacy, liquidity, and capital stability Calculation of capital adequacy ratio Total items above the line and below the line that is based on the weighted risk factors, capital adequacy ratio will be in the denominator. Numerator, based on the criteria set forth in the "Regulations on basic capital" is calculated. Therefore: M. R. Vatanparast et al. J Fundam Appl Sci. 2016, 8(3S), 552-570 554 Capital adequacy ratio = Capital base / (items above the line (risk factor) + items below the line (FCR) (risk ratio) Basel I The advent of Basel I cannot repay the debt crisis return to Mexico in 1982.were not of major regional lies in Basel I is (Rosa maria lastva 2004). Basel II Basel 2 is a voluntary agreement between the authorities agreed to total bank is the majority of developing The purpose of this agreement was to secure international financial system (Attarian, Amir, 1386). Basel II in January 2001 with the publication of a design, major changes in the capital structure of the organization in which the "New Basel Capital Accord II» is called. Between Basel I and II Basel I  simple and easy  a pillar and minimum capital  the calculation of minimum capital requirements for credit risk and market risk since 1996 and lacks the operational risk Basel II  difficult  has three pillars  take into consideration all risks Concentration of ownership The term ownership in certain cultures (1384) meaning "human right to object and can make any changes in it except what the law exception" .mnzvr of ownership structure, determine the texture and composition of the shareholders of a company some major owner of the shares of the company. Many economic theorists believe that any type of ownership can also be influential on corporate performance. Refers to a condition that the remarkable concentration of ownership of company shares to shareholders (majority) belong and shows the percentage shares are in the hands of a few. The results Mahdavi and Mydry (1384) suggests that it was high concentration of ownership in the securities market in 1384 is Tehran. 5 major shareholder in companies active in the market share of the Tehran Stock Exchange, on average, 74%, and 10 major shareholders of more than 79%, and the share is 20% shareholder of average 9/81. On the basis of any Fyndal, M. R. Vatanparast et al.
doi:10.4314/jfas.v8i3s.237 fatcat:6oj7dfmcpjcflpzwkmdql7eqee