Block-ownership structure, bank nominee director and crash-risk

Yogesh Chauhan, Kavita Wadhwa, Sudhakar Reddy Syamala and Abhinav Goyal ()

Finance Research Letters, 2015, vol. 14, issue C, 20-28

Abstract: We study the effect of outside block-ownership on the future firm-specific crash-risk of Indian firms. Major and dedicated block-owners play a significant role in aggravating the firm’s susceptibility towards crash-risk. Within a novel regulatory setup in India, where borrowing firms are entitled to a bank nominated board-member, we find an ancillary influence of bank nominee’s presence in dissipating block-owners influence on firm-level crash-risk. These results support the monitoring hypothesis in alleviating future firm-level crash-risk. Our results are robust to alternate model specifications, different crash-risk and block-ownership measures, clustering, and an array of control variables.

Keywords: Block-ownership; Crash-risk; Bank nominee; Agency problem (search for similar items in EconPapers)
JEL-codes: G10 G23 G32 G34 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:14:y:2015:i:c:p:20-28

DOI: 10.1016/j.frl.2015.07.002

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