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Ownership Structure and the Risk: Analysis of Indian Firms

Author

Listed:
  • Kumari Ranjita

    (Research Scholar, Department of Business Administration, University of Lucknow)

  • Kumar Nishant

    (Assistant Professor, Department of Business Administration, University of Lucknow)

Abstract

Considering the positive relationship between ownership and firm performance in the corporate finance literature, the paper aims to investigate the effect of ownership structure on the risk associated with the firm. Portfolio theories state that an investment with a high return is expected to be associated with high risk; so, it can be argued that ownership should have a positive relation with risk too. However, another explanation is that since large shareholders, such as promoters and financial institutions, have a significant stake in firms, in developing countries like India they will avoid excess risk taking, and so there should be a negative relationship between ownership and risk associated with firms. Analysing Nifty-500 companies for the period of 2006/07–2015/16, the study has found that Indian blockholders are in general risk-averse. Results also suggest that profitability and growth opportunities have negative effects on risk, which again establishes the positive association between ownership structure and profitability.

Suggested Citation

  • Kumari Ranjita & Kumar Nishant, 2020. "Ownership Structure and the Risk: Analysis of Indian Firms," Acta Universitatis Sapientiae, Economics and Business, Sciendo, vol. 8(1), pages 39-52, October.
    • Handle: RePEc:vrs:auseab:v:8:y:2020:i:1:p:39-52:n:3
    DOI: 10.2478/auseb-2020-0003
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    References listed on IDEAS

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    More about this item

    Keywords

    promoters; institutions; beta; Nifty-500;
    All these keywords.

    JEL classification:

    • 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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