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Corporate Risk Taking and Ownership Structure

Teodora Paligorova ()

Staff Working Papers from Bank of Canada

Abstract: This paper investigates the determinants of corporate risk taking. Shareholders with substantial equity ownership in a single company may advocate conservative investment policies due to greater exposure to firm risk. Using a large cross-country sample, I find a positive relationship between corporate risk taking and equity ownership of the largest shareholder. This result is entirely driven by investors holding the largest equity stakes in more than one company. Family shareholders avoid corporate risk taking as their ownership increases unlike mutual funds, banks, financial and industrial companies. Stronger legal protection of shareholder rights is associated with more risk taking, while stronger legal protection of creditor rights reduces risk taking.

Keywords: Financial markets; International topics (search for similar items in EconPapers)
JEL-codes: G31 G34 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2010
New Economics Papers: this item is included in nep-ban, nep-bec and nep-cfn
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:10-3

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