The role of state and foreign owners in corporate risk-taking: Evidence from privatization

Narjess Boubakri, Jean-Claude Cosset and Walid Saffar

Journal of Financial Economics, 2013, vol. 108, issue 3, 641-658

Abstract: Using a unique database of 381 newly privatized firms from 57 countries, we investigate the impact of shareholders' identity on corporate risk-taking behavior. We find strong and robust evidence that state (foreign) ownership is negatively (positively) related to corporate risk-taking. Moreover, we find that high risk-taking by foreign owners depends on the strength of country-level governance institutions. Our results suggest that relinquishment of government control, openness to foreign investment, and improvement of country-level governance institutions are key determining factors of corporate risk-taking in newly privatized firms.

Keywords: Privatization; Risk-taking; Corporate governance (search for similar items in EconPapers)
JEL-codes: G32 G34 L33 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (235)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:108:y:2013:i:3:p:641-658

DOI: 10.1016/j.jfineco.2012.12.007

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