1. bookVolume 8 (2020): Issue 1 (October 2020)
Journal Details
License
Format
Journal
eISSN
2360-0047
First Published
17 Oct 2014
Publication timeframe
1 time per year
Languages
English
access type Open Access

Ownership Structure and the Risk: Analysis of Indian Firms

Published Online: 14 Oct 2020
Volume & Issue: Volume 8 (2020) - Issue 1 (October 2020)
Page range: 39 - 52
Journal Details
License
Format
Journal
eISSN
2360-0047
First Published
17 Oct 2014
Publication timeframe
1 time per year
Languages
English
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.

Keywords

JEL Classification

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