Bank Ownership and Lending Behavior
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This paper examines the impact of the ownership structure of Finnish banks and lending
behavior from 2015 to 2024. It analyzes three forms of ownership: government-owned
banks, cooperative banks, and banks controlled by foreign entities. This study
investigates two research questions: the influence of ownership type on loan growth and
the relative stability of lending practices between state-owned and cooperative banks
compared to foreign-owned banks during economic downturns. The research employs
panel data from six Finnish banks and performs pooled OLS regressions, augmented by
robustness checks by EGLS estimation. The model comprises macroeconomic variables,
bank-specific financial indicators, and interaction terms for economic recessions to
elucidate the variations in lending behavior based on ownership type and temporal
context. The results show that the type of ownership does not have a statistically
significant effect on loan growth. The European Central Bank sets the policy rate, but
how much money each bank has affects how much they lend more. The results do not
corroborate the primary hypotheses of Agency Theory or Developmental State Theory
within the Finnish setting. They propose that regulatory harmonization and institutional
convergence could diminish ownership-related disparities in lending behavior. This
paper enhances the literature on bank ownership, financial intermediation, and lending
stability by providing evidence from unique banking sector from Finland. It offers policy-relevant findings regarding the significance of ownership and lending behavior.