Risk and Return of Publicly Held versus Privately Owned Banks

[...]In this paper, we employ a different empirical strategy tostudy the effects of ownership structure on firm performancethat is free from any corporate events in the ratherhomogenous banking industry. In essence, the performance ofpublicly traded bank holding companies (BHCs) is comparedwith that of privately held BHCs.3,4 By focusing on a singleindustry—banking—we control more precisely the effects ofindustrial organization on ownership structure. Within thebanking industry, different firms may choose to organizethemselves differently. To the extent that these firms alloperate in the same industry with presumably very similarproduction functions, it seems plausible to view ownershipstructure as exogenous in this setting, especially aftercontrolling for firm size.5 Thus, by focusing on a singleindustry, controlling for within-industry variations, andavoiding corporate events that may be associated with unusualperformance (such as de novo banking or IPOs) and bankfailures, this study contributes to the field by isolating theownership effect more accurately.[...]