Risk-Taking in the Texas S&L Industry: Charter and Ownership Effects

This paper attempts to identify some of the factors that help explain the losses experienced by S&Ls during the 1980s. Texas institutions are the focus of this study because they account for over half of the total failure costs incurred for the entire industry during the 1980s. Differences in risk‐taking behavior by S&Ls according to both charter type and ownership type are examined. The empirical results suggest that deregulation was not the fundamental cause of the industry losses. Instead, the results indicate that the basic behavioral determinants are ownership structure and owner‐contributed equity capital.