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Ownership concentration and firm risk: The moderating role of mid‐sized blockholders

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  • Silvia Rossetto
  • Nassima Selmane
  • Raffaele Staglianò

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.

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  • Silvia Rossetto & Nassima Selmane & Raffaele Staglianò, 2023. "Ownership concentration and firm risk: The moderating role of mid‐sized blockholders," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 50(1-2), pages 377-410, January.
    • Handle: RePEc:bla:jbfnac:v:50:y:2023:i:1-2:p:377-410
    DOI: 10.1111/jbfa.12634
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    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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