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Institutional development and firm risk from a dynamic perspective: Does ownership structure matter?

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  • Le, Anh-Tuan
  • Doan, Anh-Tuan
  • Phan, Thu

Abstract

In this paper, the relationship between institutional development and the risks of small and medium-sized enterprises (SMEs) in emerging Southeast Asian countries and the United States is investigated within a dynamic framework. The paper observes how two different types of national governance systems (well-developed vs. underdeveloped) influence firm risk. We also evaluate how ownership structure affects the impact of institutional environment quality on the risks of firms. We find that an improvement in institutional quality can reduce risks for SMEs in emerging Southeast Asian countries. However, there is no evidence of a relation between institutional development and firm risk in the United States. Our further analysis indicates that the adverse association between institutional development and risk is more pronounced for foreign-owned firms in both contexts studied. In contrast, state-owned firms in emerging Southeast Asian countries weaken the performance of increased institutional development in reducing firm risk, while this effect of state ownership does not exist in the United States.

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  • Le, Anh-Tuan & Doan, Anh-Tuan & Phan, Thu, 2021. "Institutional development and firm risk from a dynamic perspective: Does ownership structure matter?," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 342-357.
    • Handle: RePEc:eee:ecanpo:v:72:y:2021:i:c:p:342-357
    DOI: 10.1016/j.eap.2021.09.007
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    More about this item

    Keywords

    Institutional development; Firm risk; Ownership structure;
    All these keywords.

    JEL classification:

    • B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian; Stockholm School
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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