[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/bla/jbfnac/v50y2023i1-2p377-410.html
   My bibliography  Save this article

Ownership concentration and firm risk: The moderating role of mid‐sized blockholders

Author

Listed:
  • Silvia Rossetto
  • Nassima Selmane
  • Raffaele Staglianò
Abstract
This study analyzes the relationship between mid‐sized blockholders and firm risk. We show that ownership structure matters for firm risk beyond the first largest blockholder. Firms with multiple blockholders take more risk than firms with just one blockholder, even when controlling for the stake of the largest blockholder. Consistent with the diversification argument, we find that firm risk increases by 22% when the number of blockholders increases from one to two. Our results are robust to controlling for blockholder type and firm characteristics. We carry out various robustness checks to tackle endogeneity issues. More generally, we provide evidence that firms’ decisions are affected by mid‐sized blockholders and not merely the largest blockholder. This is in line with theoretical predictions.

Suggested Citation

  • Silvia Rossetto & Nassima Selmane & Raffaele Staglianò, 2023. "Ownership concentration and firm risk: The moderating role of mid‐sized blockholders," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 50(1-2), pages 377-410, January.
    • Handle: RePEc:bla:jbfnac:v:50:y:2023:i:1-2:p:377-410
    DOI: 10.1111/jbfa.12634
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/jbfa.12634
    Download Restriction: no
    File URL: https://libkey.io/10.1111/jbfa.12634?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Amrita Dhillon & Silvia Rossetto, 2015. "Ownership Structure, Voting, and Risk," The Review of Financial Studies, Society for Financial Studies, vol. 28(2), pages 521-560.
    2. Maury, Benjamin & Pajuste, Anete, 2005. "Multiple large shareholders and firm value," Journal of Banking & Finance, Elsevier, vol. 29(7), pages 1813-1834, July.
    3. Goergen, Marc & Renneboog, Luc, 2001. "Investment policy, internal financing and ownership concentration in the UK," Journal of Corporate Finance, Elsevier, vol. 7(3), pages 257-284, September.
    4. Cronqvist, Henrik & Nilsson, Mattias, 2003. "Agency Costs of Controlling Minority Shareholders," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(4), pages 695-719, December.
    5. Martijn Cremers & Allen Ferrell, 2014. "Thirty Years of Shareholder Rights and Firm Value," Journal of Finance, American Finance Association, vol. 69(3), pages 1167-1196, June.
    6. Admati, Anat R & Pfleiderer, Paul & Zechner, Josef, 1994. "Large Shareholder Activism, Risk Sharing, and Financial Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1097-1130, December.
    7. Luca Enriques & Paolo Volpin, 2007. "Corporate Governance Reforms in Continental Europe," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 117-140, Winter.
    8. Shleifer, Andrei & Vishny, Robert W, 1986. "Large Shareholders and Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 461-488, June.
    9. Gur Aminadav & Elias Papaioannou, 2020. "Corporate Control around the World," Journal of Finance, American Finance Association, vol. 75(3), pages 1191-1246, June.
    10. Incheol Kim & Christos Pantzalis & Bin Wang, 2018. "Shareholder coordination and stock price informativeness," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 45(5-6), pages 686-713, May.
    11. Vicente Cuñat & Mireia Gine & Maria Guadalupe, 2012. "The Vote Is Cast: The Effect of Corporate Governance on Shareholder Value," Journal of Finance, American Finance Association, vol. 67(5), pages 1943-1977, October.
    12. Konijn, Sander J.J. & Kräussl, Roman & Lucas, Andre, 2011. "Blockholder dispersion and firm value," Journal of Corporate Finance, Elsevier, vol. 17(5), pages 1330-1339.
    13. Coles, Jeffrey L. & Daniel, Naveen D. & Naveen, Lalitha, 2006. "Managerial incentives and risk-taking," Journal of Financial Economics, Elsevier, vol. 79(2), pages 431-468, February.
    14. Alex Edmans & Gustavo Manso, 2011. "Governance Through Trading and Intervention: A Theory of Multiple Blockholders," The Review of Financial Studies, Society for Financial Studies, vol. 24(7), pages 2395-2428.
    15. Marco Becht & Julian Franks & Jeremy Grant & Hannes F. Wagner, 2017. "Returns to Hedge Fund Activism: An International Study," The Review of Financial Studies, Society for Financial Studies, vol. 30(9), pages 2933-2971.
    16. Franks, Julian & Mayer, Colin & Renneboog, Luc, 2001. "Who Disciplines Management in Poorly Performing Companies?," Journal of Financial Intermediation, Elsevier, vol. 10(3-4), pages 209-248, July.
    17. Laeven, Luc & Levine, Ross, 2009. "Bank governance, regulation and risk taking," Journal of Financial Economics, Elsevier, vol. 93(2), pages 259-275, August.
    18. Leech, Dennis & Leahy, John, 1991. "Ownership Structure, Control Type Classifications and the Performance of Large British Companies," Economic Journal, Royal Economic Society, vol. 101(409), pages 1418-1437, November.
    19. Yiwei Dou & Ole-Kristian Hope & Wayne B. Thomas & Youli Zou, 2016. "Individual Large Shareholders, Earnings Management, and Capital-Market Consequences," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 43(7-8), pages 872-902, July.
    20. Denes, Matthew R. & Karpoff, Jonathan M. & McWilliams, Victoria B., 2017. "Thirty years of shareholder activism: A survey of empirical research," Journal of Corporate Finance, Elsevier, vol. 44(C), pages 405-424.
    21. Mara Faccio & Maria-Teresa Marchica & Roberto Mura, 2011. "Large Shareholder Diversification and Corporate Risk-Taking," The Review of Financial Studies, Society for Financial Studies, vol. 24(11), pages 3601-3641.
    22. Roberts, Michael R. & Whited, Toni M., 2013. "Endogeneity in Empirical Corporate Finance1," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 493-572, Elsevier.
    23. Vasia Panousi & Dimitris Papanikolaou, 2012. "Investment, Idiosyncratic Risk, and Ownership," Journal of Finance, American Finance Association, vol. 67(3), pages 1113-1148, June.
    24. Clifford G. Holderness, 2009. "The Myth of Diffuse Ownership in the United States," The Review of Financial Studies, Society for Financial Studies, vol. 22(4), pages 1377-1408, April.
    25. Donelli, Marcelo & Larrain, Borja & Francisco Urzúa, I., 2013. "Ownership Dynamics with Large Shareholders: An Empirical Analysis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 48(2), pages 579-609, April.
    26. Luc Laeven & Ross Levine, 2008. "Complex Ownership Structures and Corporate Valuations," The Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 579-604, April.
    27. Sereeparp Anantavrasilp & Abe de Jong & Douglas V. DeJong & Ulrich Hege, 2020. "Blockholder leverage and payout policy: Evidence from French holding companies," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(1-2), pages 253-292, January.
    28. Karpoff, Jonathan M. & Malatesta, Paul H. & Walkling, Ralph A., 1996. "Corporate governance and shareholder initiatives: Empirical evidence," Journal of Financial Economics, Elsevier, vol. 42(3), pages 365-395, November.
    29. Anat R. Admati & Paul Pfleiderer, 2009. "The "Wall Street Walk" and Shareholder Activism: Exit as a Form of Voice," The Review of Financial Studies, Society for Financial Studies, vol. 22(7), pages 2445-2485, July.
    30. Stuart L. Gillan & Laura T. Starks, 2007. "The Evolution of Shareholder Activism in the United States," Journal of Applied Corporate Finance, Morgan Stanley, vol. 19(1), pages 55-73, January.
    31. Kose John & Lubomir Litov & Bernard Yeung, 2008. "Corporate Governance and Risk‐Taking," Journal of Finance, American Finance Association, vol. 63(4), pages 1679-1728, August.
    32. Alon Brav & Wei Jiang & Frank Partnoy & Randall Thomas, 2008. "Hedge Fund Activism, Corporate Governance, and Firm Performance," Journal of Finance, American Finance Association, vol. 63(4), pages 1729-1775, August.
    33. Demsetz, Harold & Lehn, Kenneth, 1985. "The Structure of Corporate Ownership: Causes and Consequences," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1155-1177, December.
    34. John Core & Wayne Guay, 2002. "Estimating the Value of Employee Stock Option Portfolios and Their Sensitivities to Price and Volatility," Journal of Accounting Research, Wiley Blackwell, vol. 40(3), pages 613-630, June.
    35. Ani Manakyan Mathers & Bin Wang & Xiaohong (Sara) Wang, 2020. "Shareholder coordination and corporate innovation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(5-6), pages 730-759, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Boubakri, Narjess & Cosset, Jean-Claude & Mishra, Dev & Somé, Hyacinthe Y., 2023. "The value of risk-taking in mergers: Role of ownership and country legal institutions," Journal of Empirical Finance, Elsevier, vol. 70(C), pages 427-444.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Edmans, Alex & Holderness, Clifford, 2016. "Blockholders: A Survey of Theory and Evidence," CEPR Discussion Papers 11442, C.E.P.R. Discussion Papers.
    2. Alex Edmans, 2014. "Blockholders and Corporate Governance," Annual Review of Financial Economics, Annual Reviews, vol. 6(1), pages 23-50, December.
    3. Sabri Boubaker & Pascal Nguyen & Wael Rouatbi, 2016. "Multiple Large Shareholders and Corporate Risk†taking: Evidence from French Family Firms," European Financial Management, European Financial Management Association, vol. 22(4), pages 697-745, September.
    4. Konijn, Sander J.J. & Kräussl, Roman & Lucas, Andre, 2011. "Blockholder dispersion and firm value," Journal of Corporate Finance, Elsevier, vol. 17(5), pages 1330-1339.
    5. Bajo, Emanuele & Croci, Ettore & Marinelli, Nicoletta, 2020. "Institutional investor networks and firm value," Journal of Business Research, Elsevier, vol. 112(C), pages 65-80.
    6. Alex Edmans & Gustavo Manso, 2011. "Governance Through Trading and Intervention: A Theory of Multiple Blockholders," The Review of Financial Studies, Society for Financial Studies, vol. 24(7), pages 2395-2428.
    7. Sabri Boubaker & Riadh Manita & Wael Rouatbi, 2021. "Large shareholders, control contestability and firm productive efficiency," Annals of Operations Research, Springer, vol. 296(1), pages 591-614, January.
    8. Jing Huang & Steven R. Matsunaga & Z. Jay Wang, 2020. "The Role of Pension Business Benefits in Institutional Block Ownership and Corporate Governance," Contemporary Accounting Research, John Wiley & Sons, vol. 37(4), pages 1959-1989, December.
    9. Mike Burkart & Samuel Lee, 2022. "Activism and Takeovers," The Review of Financial Studies, Society for Financial Studies, vol. 35(4), pages 1868-1896.
    10. Ben-Nasr, Hamdi & Boubaker, Sabri & Rouatbi, Wael, 2015. "Ownership structure, control contestability, and corporate debt maturity," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 265-285.
    11. Rossi, Fabrizio & Barth, James R. & Cebula, Richard J., 2018. "Do shareholder coalitions affect agency costs? Evidence from Italian-listed companies," Research in International Business and Finance, Elsevier, vol. 46(C), pages 181-200.
    12. Mónica López-Puertas Lamy, 2012. "How does Ownership Structure Influence Bank Risk? Analyzing the Role of Managerial Incentives," Working Papers 1208, Departament Empresa, Universitat Autònoma de Barcelona, revised Nov 2012.
    13. Boubaker, Sabri & Nguyen, Pascal & Rouatbi, Wael, 2012. "Large shareholders and firm risk-taking behavior," MPRA Paper 39005, University Library of Munich, Germany.
    14. Dasgupta, Amil & Brav, Alon & Mathews, Richmond, 2016. "Wolf Pack Activism," CEPR Discussion Papers 11507, C.E.P.R. Discussion Papers.
    15. De-la-Hoz, Maria Camila & Pombo, Carlos, 2016. "Institutional investor heterogeneity and firm valuation: Evidence from Latin America," Emerging Markets Review, Elsevier, vol. 26(C), pages 197-221.
    16. Andy Lardon & Christof Beuselinck & Marc Deloof, 2019. "Does stable ownership create value? Evidence from the global financial crisis," Review of Quantitative Finance and Accounting, Springer, vol. 52(2), pages 573-642, February.
    17. Balachandran, Balasingham & Faff, Robert, 2015. "Corporate governance, firm value and risk: Past, present, and future," Pacific-Basin Finance Journal, Elsevier, vol. 35(PA), pages 1-12.
    18. Ravid, S. Abraham & Sekerci, Naciye, 2020. "Large investors’ portfolio composition and firms value," Journal of Corporate Finance, Elsevier, vol. 61(C).
    19. Raluca Roman, 2015. "Shareholder activism in banking," Research Working Paper RWP 15-9, Federal Reserve Bank of Kansas City.
    20. Teodora Paligorova, 2010. "Corporate Risk Taking and Ownership Structure," Staff Working Papers 10-3, Bank of Canada.

    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jbfnac:v:50:y:2023:i:1-2:p:377-410. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0306-686X .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.