Earnings, risk-taking, and capital accumulation in small and large community banks
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Author/Creator ORCID
Date
2019-03-09
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Citation of Original Publication
Eliana Balla and Morgan J.Rose, Earnings, risk-taking, and capital accumulation in small and large community banks, Journal of Banking & Finance Volume 103, Pages 36-50 (2019), https://doi.org/10.1016/j.jbankfin.2019.03.005
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© 2019 Elsevier B.V. All rights reserved.
© 2019 Elsevier B.V. All rights reserved.
Subjects
Abstract
We examine the relationships between ownership structure and both earnings and risk-taking among community banks before, during, and after the US financial crisis. We find that publicly-held small community banks had lower earnings than privately-held ones before the recession, but had higher earnings during and after the recession. Publicly-held small community banks exhibited similar risk-taking to privately-held ones before and during the recession, but greater risk-taking after. We also find that publicly-held small community banks de-risked more slowly than privately-held ones following the recession. Large community banks, on the other hand, show no consistent relationship between ownership structure and earnings, and a strong cyclical relationship between ownership structure and risk-taking. These findings expand our understanding of how community bank performance and capital accumulation behaves through different cyclical periods, and how ownership structure affects that behavior.