Publication Date


Document Type


First Advisor

Newman, Joseph A.

Degree Name

B.S. (Bachelor of Science)

Legacy Department

Department of Finance


My thesis focuses on the agency theory, but more specifically on the effect of employee ownership in banking. The agency theory states that top management is less willing to take large risks if they own stock in the company. My thesis looks at banks that employ Employee Stock Ownership Programs (ESOPs) and compares them with banks without ESOPs. In my thesis, I measure the amount of risk that banks take with 2 specific financial ratios. The equity ratio measures the amount of risk taken with respect to the bank's capital. The Loan-to-Deposit ratio measures risk with respect to loans as a percentage of deposits. My thesis also included statistical tests to find the confidence interval of the results and the correlation between the 2 risk measures. I found that there is a high correlation between the two measures in ESOP banks. I also found that ESOP banks tend to be more risk averse when dealing in capital, as opposed to the risk taken in the amount of their loans as a percentage of deposits.


5 pages




Northern Illinois University

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