This research is based on Indian banks, examining the mutual relationship between owner concentration (OC; promoters, retail investors (ri), and institutional investors (ii)), Herfindahl–Hirschman Index (HHI), market capitalization (mcap), and net interest margin (NIM). The agency and stewardship theory -grounded study proposes to offer a nuanced understanding of the association between OC, mcap, and NIM. This study measures nonlinear associations among the variables. Static panel data regression is applied to examine the association between OC and bank size and profitability. For the study, data from 23 Indian bank for 11 years (2012–2022) are combined. It is observed that promoter shareholding and HHI have an inverted-U-shaped relationship with NIM; that is, NIM is lower after a certain threshold. Likewise, ii2 and ri2 have a U-shaped relationship, it signifies increase in OC leads to fall in NIM intially, after reaching, but after a certain threshold, NIM increases. Prom2 has an inverted-U-shaped relationship with firm size, resulting in a decrease in market cap after a threshold. While ii2 and HHI2 do not have any notable effect on mcap, ri2 has a U-shaped relationship, which boosts mcap above a certain threshold. This study’s findings help managers and shareholders consider firm size and profitability while deciding the bank owner concentration level. We have not observed any paper assessing and reporting the nonlinear relationship between owner concentration, bank size, and profitability of Indian banks.
Agarwal et al. (Mon,) studied this question.