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A now well-established literature in economics assesses the effect of different forms of bank ownership on various measures of banks’ performance. Such literature has its theoretical roots in a surprisingly narrow framework, broadly identified with property rights theory. However, such theory – or bundle of theories – has been increasingly criticized for its inability to account for the emergence, the existence and the functioning of business firms. Indeed, many works and authors counter mainstream property rights theory, arguing instead that firms are entities that cannot be possessed – and that equity ownership should not be equaled with firm ownership. Nowhere is perhaps this critique more salient than in the field of banking. As the 2007/08 crisis reminded many observers, banks are not just firms or corporations: they are institutions, endowed with a dual social purpose (the creation of money and the setting of rules for access to credit). If the ownership of firms is difficult to conceive, the ownership of institutions such as banks is obviously harder still to envision. However, over the past twenty to thirty years, regulatory reform in finance has led to the empowerment of ownership, and especially private ownership, in the field of banking. This is apparent, for instance, with the 2007/44 European Directive, which fully liberalized equity ownership (and control) of banks. Yet, even within the actual legal and regulatory framework, there are many limitations to property rights as applied to banks. This paper thus has two aims: firstly, to develop a theoretical explanation of the heuristic and empirical limitations of “bank ownership”; and, secondly, to analyze, on the basis of an empirical case study of Italian banking law, the nature and extent of the property rights associated with ownership in banks.

The central result is an equality connecting accounting numbers with information. ln1+incomeassets=rf+IX;Y\ln \left( 1+\frac{income}{assets}\right) =r_{f}+I\left( X;Y\right), rfr_{f} is the risk free rate, lnln is the natural logarithm, YY is the outcome of interest, XX is the information signal about YY, and I(X;Y)I(X;Y) is a Shannon information measure. The equality is derived using economic income accounting; it is shown to hold, under appropriate conditions, for declining balance and straight line depreciation methods. Some social welfare implications are explored.

This rejoinder provides the editor's answer to Jacques-Olivier Charron's commentary to ‘Finance at Work’.