The Effects of Ownership Concentration and Corporate Governance on Corporate Risk-Taking: The Case of Thailand

32 Pages Posted: 14 May 2019

See all articles by Seksak Jumreonwong

Seksak Jumreonwong

Thammasat University

Sirimon Treepongkaruna

The University of Western Australia; Financial Research Network (FIRN)

Panu Prommin

Bank of Thailand

Pornsit Jiraporn

Pennsylvania State University - School of Graduate Professional Studies (SGPS)

Date Written: April 22, 2019

Abstract

We investigate the effects of ownership concentration and corporate governance on the extent of risk-taking in an important emerging economy- Thailand. Ownership in Thai firms are substantially more concentrated than that in developed economies, providing a unique opportunity to study the effect of highly concentrated ownership on risk-taking. Large owners are under-diversified and are thus more vulnerable to the firm’s idiosyncratic risk. Therefore, they tend to advocate less risky corporate policies and strategies. Consistent with this notion, we find that more concentrated ownership induces firms to take significantly less risk. The results are corroborated by additional analysis, including an instrumental-variable analysis and propensity score matching. Finally, we also document a non-monotonic effect of corporate governance on risk-taking.

Keywords: ownership, corporate governance, risk-taking, agency theory, instrumental variable

JEL Classification: G32, G34

Suggested Citation

Jumreonwong, Seksak and Treepongkaruna, Sirimon and Prommin, Panu and Jiraporn, Pornsit, The Effects of Ownership Concentration and Corporate Governance on Corporate Risk-Taking: The Case of Thailand (April 22, 2019). Available at SSRN: https://ssrn.com/abstract=3376140 or http://dx.doi.org/10.2139/ssrn.3376140

Seksak Jumreonwong

Thammasat University ( email )

Bangkok, 10200
Thailand

Sirimon Treepongkaruna

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia
+61864887853 (Phone)
+61864881086 (Fax)

Financial Research Network (FIRN)

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

HOME PAGE: http://www.firn.org.au

Panu Prommin

Bank of Thailand ( email )

273 Samsen Road
Bangkhunprom, Bangkok 10200
United States

Pornsit Jiraporn (Contact Author)

Pennsylvania State University - School of Graduate Professional Studies (SGPS) ( email )

30 E. Swedesford Road
Malvern, PA 19355
United States
(484) 753-3655 (Phone)

HOME PAGE: http://www.personal.psu.edu/pxj11/index1.html

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