I hypothesize that risk taking is greater in stock thrifts than in mutual thrifts because the residual and fixed claims are separable. I find that stock thrifts exhibit greater profit variability during the 1982–1988 period and that conversions from mutual to stock ownership are associated with increased investment in risky assets and increased profit variability. These findings illustrate the relation between the structure of residual claims, incentives, and firm performance as well as the unintended consequences resulting from changes in thrift regulations