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Idiosyncratic Risk and Corporate Governance: Evidence from Jordan

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  • Diana Abu-Ghunmi
  • Adel Bino
  • Mohammad Tayeh

Abstract

This article offers evidence in support of the hypothesis that when investors have weak protection, small investors can suffer expropriation by large shareholders. In this kind of situation, a stock’s idiosyncratic risk is found to be negatively related to ownership concentration, which indicates that the cost of controlling ownership may outweigh its benefits. This is consistent with the view that minority investors have less incentive to invest in companies with weak protection for investors. When this is accompanied by low-quality information disclosed to the public, private information is not likely to be reflected in stock prices, resulting in lower idiosyncratic risk.

Suggested Citation

  • Diana Abu-Ghunmi & Adel Bino & Mohammad Tayeh, 2015. "Idiosyncratic Risk and Corporate Governance: Evidence from Jordan," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 51(S4), pages 40-50, July.
    • Handle: RePEc:mes:emfitr:v:51:y:2015:i:s4:p:s40-s50
    DOI: 10.1080/1540496X.2015.1026717
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    Cited by:

    1. Belasen, Ariel R. & Kutan, Ali M. & Belasen, Alan T., 2017. "The impact of unsuccessful pirate attacks on financial markets: Evidence in support of Leeson's reputation-building theory," Economic Modelling, Elsevier, vol. 60(C), pages 344-351.

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