Large Shareholders and Firm Risk-Taking Behavior

49 Pages Posted: 19 Mar 2012 Last revised: 25 Dec 2015

See all articles by Sabri Boubaker

Sabri Boubaker

Ecole de Management de Normandie

Pascal Nguyen

Neoma Business School; University of Technology Sydney (UTS); Financial Research Network (FIRN)

Wael Rouatbi

Montpellier Business School

Date Written: March 19, 2012


We investigate whether multiple large shareholders (MLS) affect corporate risk-taking. Using hand-collected data on French publicly-listed companies over the period 2003-2007, we show that the presence, number and voting power of MLS, other than the largest controlling shareholder (LCS), are associated with greater variability in operating performance (ROA), market value (Tobin’s Q) and stock returns. In contrast, the presence of a single LCS is associated with less variability in firm performance, especially when the divergence between the LCS’s control and cash flow rights is large. This result suggests that MLS are able to prevent the LCS from dictating its preference for low-risk projects in order to protect its future consumption of private benefits. As a consequence, firms undertake better investments regardless of their intrinsic risks, and this eventually leads them to achieve higher performance. MLS are thus confirmed to play a critical role in corporate governance.

Keywords: Risk-taking, ownership structure, benefit of control, contestability, corporate governance

JEL Classification: G30, G32, G34

Suggested Citation

Boubaker, Sabri and Nguyen, Pascal and Rouatbi, Wael, Large Shareholders and Firm Risk-Taking Behavior (March 19, 2012). 2012 Financial Markets & Corporate Governance Conference, Available at SSRN: or

Sabri Boubaker

Ecole de Management de Normandie ( email )

9 rue Claude Bloch
Le Havre Cedex, Cedex 4 14052 Caen

HOME PAGE: http://

Pascal Nguyen (Contact Author)

Neoma Business School ( email )

1 Rue du Maréchal Juin
Mont Saint Aignan Cedex, 76825
+33 2 3282 5774 (Phone)

University of Technology Sydney (UTS) ( email )

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+61 2 9514 7718 (Phone)
+61 2 9514 7711 (Fax)


Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane


Wael Rouatbi

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, 34080

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