Abstract

http://ssrn.com/abstract=1572667
 
 

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Large Shareholder Diversification and Corporate Risk-Taking


Mara Faccio


Purdue University - Krannert School of Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Maria-Teresa Marchica


University of Manchester - Manchester Business School

Roberto Mura


University of Manchester - Manchester Business School

November 15, 2011

Manchester Business School Research Paper No. 618

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 can improve economic welfare.

Number of Pages in PDF File: 66

Keywords: Risk-taking choices, Large shareholders, Portfolio diversification

JEL Classification: G11, G15, G31

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Date posted: March 17, 2010 ; Last revised: May 9, 2012

Suggested Citation

Faccio, Mara and Marchica, Maria-Teresa and Mura, Roberto, Large Shareholder Diversification and Corporate Risk-Taking (November 15, 2011). Manchester Business School Research Paper No. 618. Available at SSRN: http://ssrn.com/abstract=1572667 or http://dx.doi.org/10.2139/ssrn.1572667

Contact Information

Mara Faccio (Contact Author)
Purdue University - Krannert School of Management ( email )
1310 Krannert Building
West Lafayette, IN 47907-1310
United States
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Maria-Teresa Marchica
University of Manchester - Manchester Business School ( email )
Crawford House
Oxford Road
Manchester M13 9PL
United Kingdom
+44(0)1612750121 (Phone)
+44(0)1612754023 (Fax)
HOME PAGE: http://www.personal.mbs.ac.uk/mmarchica/index.htm
Roberto Mura
University of Manchester - Manchester Business School ( email )
Crawford House
Oxford Road
Manchester, Lancashire M13 9PL
United Kingdom
+44 (0) 161 275 4023 (Fax)
HOME PAGE: http://www.robertomura.com
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