Government ownership and risk taking among European savings banks

Yaseen Ghulam, Julian Beier

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This study aims to investigate whether government ownership of savings banks in Europe has a significant effect on their risk-taking behaviour. The study employs time-varying Z-score to measure risk using yearly accounting and ownership data of 721 savings banks from seven European countries over a period of 16 years from 2000 to 2015, covering the period before, during, and after the global financial crisis. The empirical estimates suggest an overall positive relationship between fully and partly government-owned savings banks and their respective Z-scores. Whereas the same positive relationship was found for the periods before and after the crisis, it could not be confirmed for the crisis period from 2008 to 2010, indicating that financial shocks render government ownership insignificant in explaining the risk behaviour of savings banks. On a country-level analysis, a positive relationship was obtained for France and Sweden, whereas ownership was not significant for the individual samples of the remaining countries. Overall, government ownership is not associated with an increase in savings banks’ risk of default for the crisis period, which therefore contradicts the call for more privatisation within the European banking market.
Original languageEnglish
Number of pages13
JournalJournal of Banking Regulation
Early online date14 Aug 2017
Publication statusEarly online - 14 Aug 2017


  • Savings banks
  • Government ownership
  • Bank risk
  • Z-score
  • Time-varying


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