Large Shareholder Diversification And Corporate Risk- Taking

Mara Faccio (), Maria-Teresa Marchica and Roberto Mura

Purdue University Economics Working Papers from Purdue University, Department of Economics

Abstract: Using new data for the universe of firms covered in Amadeus, we reconstruct the portfolios of shareholders who hold equity stakes in private and publicly-traded European firms. We find great heterogeneity in the degree of portfolio diversification across large shareholders. Exploiting this heterogeneity, we document that firms controlled by diversified large shareholders undertake riskier investments than firms controlled by non-diversified large shareholders. The impact of large shareholder diversification on corporate risk-taking is both economically and statistically significant. Our results have important implications at the policy level because they identify one channel through which policy changes aimed at improving capital market development can improve economic welfare.

Keywords: Risk-taking choices; Large shareholders; Portfolio diversification (search for similar items in EconPapers)
JEL-codes: G11 G15 G31 (search for similar items in EconPapers)
Pages: 53
Date: 2010-07
New Economics Papers: this item is included in nep-bec, nep-eur and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Related works:
Journal Article: Large Shareholder Diversification and Corporate Risk-Taking (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pur:prukra:1241

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