The Role of State and Foreign Owners in Corporate Risk-Taking: Evidence from Privatization

50 Pages Posted: 4 Jul 2012 Last revised: 3 Sep 2012

See all articles by Narjess Boubakri

Narjess Boubakri

American University of Sharjah - School of Business and Management; HEC Montreal - Department of Finance

Jean-Claude Cosset

HEC Montreal

Walid Saffar

Hong Kong Polytechnic University - School of Accounting and Finance

Date Written: September 3, 2012

Abstract

Using a unique database of 381 newly privatized firms from 57 countries, we investigate the impact of shareholders’ identity on corporate risk-taking behavior. We find strong and robust evidence that state (foreign) ownership is negatively (positively) related to corporate risk-taking. Moreover, we find that high risk-taking by foreign owners depends on the strength of country-level governance institutions. Our results suggest that relinquishment of government control, openness to foreign investment, and improvement of country-level governance institutions are key determining factors of corporate risk-taking in newly privatized firms.

Keywords: privatization, risk-taking, corporate governance

JEL Classification: G32, G34

Suggested Citation

Boubakri, Narjess and Cosset, Jean-Claude and Saffar, Walid, The Role of State and Foreign Owners in Corporate Risk-Taking: Evidence from Privatization (September 3, 2012). Available at SSRN: https://ssrn.com/abstract=2099130 or http://dx.doi.org/10.2139/ssrn.2099130

Narjess Boubakri

American University of Sharjah - School of Business and Management ( email )

P.O. Box 26666
Sharjah
United Arab Emirates

HOME PAGE: http://www.aus.edu

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada

Jean-Claude Cosset

HEC Montreal ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
514-340-6872 (Phone)
514-340-6987 (Fax)

Walid Saffar (Contact Author)

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

Li Ka Shing Tower
Hong Hum
Kowloon
Hong Kong

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
251
Abstract Views
2,771
rank
128,348
PlumX Metrics