Control rights versus pecuniary rights, financial crisis and vulnerability of European banks.

Summary This paper studies the impact of a divergence between control rights and pecuniary rights of ultimate shareholders on the default risk of European banks. The results show that although this divergence is normally associated with a higher default risk, it has, on the contrary, contributed to the resilience of banks during the 2007-2008 financial crisis. Further analysis shows that such an effect is accentuated when the bank is controlled by family shareholders or when the bank is located in a country with low shareholder protection.