Theses and Dissertations

Date of Award


Document Type


Degree Name

Doctor of Philosophy (PhD)



First Advisor

Dr. Dave O. Jackson

Second Advisor

Dr. Andre V. Mollick

Third Advisor

Dr. Diego A. Escobari


This dissertation consists of three chapters, focusing on U.S. bank holding companies from 2007 to 2013 to explore the role of institutional ownership in bank governance. In addition to the impact of ownership proportion, I explore the impact of ownership dispersion among institutional investors on bank safety, profitability and performance.

In Chapter I, I show that the proportion of institutional ownership in banks has increased significantly after the recent financial crisis. Moreover, I examine the impact of institutional ownership proportion and dispersion on bank safety using capital ratios (i.e., Tier 1 and Tier 2 capital ratios) and credit risk (i.e. impaired loans, loan loss reserves, and net charge-off ratios). More importantly, I disentangle the impact of passive institutions (i.e., bank and insurance companies) from active institutions (i.e., mutual & pension funds, financial companies, private equity firms, and venture capitals). The results indicate that institutional investors alleviate risk and improve bank safety; active institutions significantly enhance capital ratios while passive institutions significantly alleviate credit risk.

In Chapter II, I examine the impact of institutional ownership proportion and dispersion on bank profit margins (i.e., net interest, net noninterest, and net operating margins) and performance (i.e., ROA and Tobin’s Q). After disentangling passive institutions from active institutions, and controlling for the endogeneity of institutions decision to invest in bank holding companies using dynamic panel GMM two-step estimations with Windmaijer’s finite-sample robust standard errors, I find evidence that institutional investors, especially passive institutions, play a key role in bank governance by enhancing profitability and performance.

In Chapter III, I summarize the findings of this dissertation and provide concluding remarks. Given the overall findings, bank safety, profitability and performance are not entirely the sole responsibility of executives and regulators. I provide evidence that the extent, type and distribution of institutional investors can be used as a proxy for additional monitoring of banks over and above that done by government regulators. Investors and regulators would do well to factor in institutional holdings in bank evaluations as institutional investors play a vital role not only in alleviating risk and improving safety but also in enhancing profitability and performance.


Copyright 2016 Mohammad Jafarinejad. All Rights Reserved.