 The effect of institutional cross-ownership on corporate risk-taking in a transitional economyWenjing Yin, Weiping Li and Yumiao Yu Pacific-Basin Finance Journal, 2024, vol. 83, issue C Abstract: This study documents the unintended effect of institutional cross-ownership on corporate risk-taking in a transitional economy. Theoretically, cross-owners can increase their influence in corporate governance through voice and exit. However, such an insight may not align with the reality of the Chinese market, where institutional activism is limited. We predict and document that the amplified exit threat of institutional cross-ownership increases its contribution to managerial myopia and reduces risk-taking activities. This effect is more pronounced for firms when the exit threat is more credible or when managers are more concerned about market performance. As expected, the association is driven primarily by active short-term investors, whose exit threat is much stronger. Our findings suggest that institutional cross-ownership may inadvertently exacerbate agency problems because, in some cases, it may discourage managers from taking value-maximizing actions. Keywords: Institutional cross-ownership; Threat of exit; Stock market pressure; Corporate risk-taking (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:83:y:2024:i:c:s0927538x23003104 DOI: 10.1016/j.pacfin.2023.102239 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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