Unraveling the ownership–risk nexus: the critical role of board attributes in shaping firm risk

Shallu Batra and Mahender Yadav

Indian Growth and Development Review, 2026, vol. 19, issue 2-3, 343-371

Abstract: PurposeThe purpose of this study is twofold: first, to investigate how ownership structure impacts the risk of the firm. The second is whether corporate board characteristics influence the relationship between ownership concentration and firm risk.Design/methodology/approachThis empirical study relied on the non-financial companies of the BSE-100 index for the period 2013–2023. This study uses a random effects estimator, as various optimum tests suggest examining the relationship between ownership structure and firm risk.FindingsThe results of this study indicate that concentrated ownership is negatively related to firm risk, supporting the alignment hypothesis. Institutional ownership is positively related to firm risk, while foreign ownership is negatively linked to risk measurements. Moreover, the association between concentrated ownership and business risk may not be affected because of the presence of independent directors on the board or by the size of the board. This study reflects that the supreme power of promoters may not be affected by the presence of independent directors or board size.Research limitations/implicationsThis study guides that regulators should follow strict regulations regarding the trading patterns of institutional investors. It is required that the Indian Government adopt a liberal foreign-flow policy that would encourage international investment. Also, it needs to strictly enforce the appointment of independent directors in companies for the efficiency of the corporate boards.Originality/valueTo the best of the authors’ knowledge, this study fills a gap in the literature by examining the link between ownership structure and risk in banks, offering the first study to investigate the ownership structure and risk relationship across a cross-industry sample. To date, no study has explored the moderating effect of corporate boards on the relationship between concentrated ownership and firm risk.

Keywords: Ownership structure; Institutional ownership; Foreign ownership; Ownership concentration; Promoter ownership; Risk (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eme:igdrpp:igdr-11-2024-0197

DOI: 10.1108/IGDR-11-2024-0197

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