Title

Bank Ownership, Free Cash Flow, and Agency Behavior.

Document Type

Article

Publication Date

2015

Abstract

This paper uses bank holding company financial report data to analyze agency behavior differences between public (listed on a stock exchange) and private banks. We provide evidence consistent with higher perquisite consumption and risk aversion among managers at public banks. We find weak evidence of greater value-destroying acquisitions by public bank managers. We provide strong evidence that managers of banks with large free cash flows make loans of average risk for below-market interest rates and experience higher loan losses, consistent with slacking through lack of proper risk assessment and loan monitoring.

Recommended Citation

Haggard, K. Stephen, and John S. Howe. Bank Ownership, Free Cash Flow, and Agency Behavior." Banking & Finance Review 7, no. 1 (2015)."

Department

Finance and General Business

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