Institutional Ownership and Tail Risk Comovement in Banks
Bibliographic record
Abstract
Recent regulatory discussions concentrate on the role institutional investors play in the financial sector. We investigate the determinants and consequences of institutional ownership (IO) in banks. Our findings suggest that institutional owners invest more in banks that have a lower proportion of consumer and real estate loans; are less opaque; have a lower level of insider control; are larger, older, and more capitalized; and have lower stock return volatility. In contrast, banks’ funding characteristics, loan risk appetite, and connectedness with other banks do not seem to be relevant factors in institutional investors’ decisions to hold a bank. We further investigate whether IO is related to tail risk comovement and changes in bank operations. We find robust evidence suggesting that IO is positively associated with a bank’s future tail risk and that the association between IO and tail risk is significantly higher for banks than it is for nonfinancial firms. We also find that this relationship is stronger for banks during economic downturns. Correspondingly, we find that there is a greater reduction in lending growth and greater increases in opacity and risk taking during recessionary periods for banks with higher levels of IO. Our results suggest that institutions with low monitoring incentives in particular play a role in increasing tail risk comovement and in the deleterious real effects of IO. Lastly, we find evidence suggesting that disclosure may play a role in mitigating the relationship between IO and tail risk comovement. This paper was accepted by Eric So, accounting. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2023.02522 .
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How this classification was reachedexpand
Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.002 | 0.000 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.000 |
| Bibliometrics | 0.001 | 0.001 |
| Science and technology studies | 0.000 | 0.001 |
| Scholarly communication | 0.000 | 0.000 |
| Open science | 0.000 | 0.000 |
| Research integrity | 0.000 | 0.000 |
| Insufficient payload (model declined to judge) | 0.000 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one teacher head, not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".