OWNERSHIP STRUCTURE AND RISK PROFILE OF BANKS IN EMERGING ECONOMIES

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Abstract

This article analyzes the relationship between ownership structure and risk profile based on the data from the emerging banking market. Using Kohonen self-organizing maps, we divide banks into clusters according to the type of risk profile. This mapping technique is based on panel data dimensionality reduction, as risk profile is changeable over time. We adopted the Basel Committee on Banking Supervision recommendations regarding the types of concentration of funding serving also as a basis for determining the risk exposure of banks and used them as an input for Kohonen maps. We conclude that business models and, consequently, risk exposures of banks significantly depend on sources of capital (domestic private, foreign, state). Our empirical results show that ownership type is a major, but not the only factor influencing bank risk profiles. These findings call for a change of the regulatory paradigm in emerging (banking) markets.

Keywords: Bank Ownership Structure, Risk Profile, Banking Regulation, Kohonen Self-Organizing Maps, Emerging Banking Market

Authors’ individual contribution: Conceptualization – D.R., M.O., and A.H.; Methodology - D.R.; Writing – D.R., M.O., Y.M., and A.H.; Formal Analysis - D.R.; Investigation - D.R.; Visualization - M.O. and D.R.; Resources - M.O.; Supervision - A.H.; Funding Acquisition - A.H.

JEL Classification: G21, G38, G32

Received: 12.06.2019
Accepted: 29.07.2019
Published online: 23.08.2019

How to cite this paper: Riabichenko, D., Oehmichen, M., Mozghovyi, Y., & Horsch, A. (2019). Ownership structure and risk profile of banks in emerging economies. Risk Governance and Control: Financial Markets & Institutions, 9(3), 46-65. https://doi.org/10.22495/rgcv9i3p4