Ownership Concentration and Firm Risk: The Moderating Role of Mid-Sized Blockholders

Journal of Business Finance and Accounting, forthcoming

50 Pages Posted: 17 Sep 2012 Last revised: 19 Apr 2022

See all articles by Silvia Rossetto

Silvia Rossetto

University of Toulouse 1 - Toulouse School of Economics (TSE)

Nassima Selmane

University of Groningen

Raffaele Stagliano

University of Messina

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.

Keywords: Corporate Governance, Ownership Structure, Firm Risk, Blockholders, Volatility of Operating Performance

JEL Classification: G11, G30, G32, G34

Suggested Citation

Rossetto, Silvia and Selmane, Nassima and Stagliano, Raffaele, Ownership Concentration and Firm Risk: The Moderating Role of Mid-Sized Blockholders. Journal of Business Finance and Accounting, forthcoming, Available at SSRN: https://ssrn.com/abstract=2079554 or http://dx.doi.org/10.2139/ssrn.2079554

Silvia Rossetto (Contact Author)

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Nassima Selmane

University of Groningen

Postbus 72
9700 AB Groningen
Netherlands

Raffaele Stagliano

University of Messina ( email )

Piazza Pugliatti, 1
Messina, 98122
Italy

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