<abstract xmlns="http://www.w3.org/1999/xhtml"><p>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.</p></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.

Ownership Structure and the Risk: Analysis of Indian Firms

Acta Universitatis Sapientiae, Economics and Business

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

{"article-title":"Ownership Structure and the Risk: Analysis of Indian Firms"}

Considering the positive relationship between ownership and firm performance in the corporate finance literature, the paper aims to investigate the effect of...

Ownership Structure and the Risk: Analysis of Indian Firms

Publié en ligne: 14 oct. 2020

Pages: 39 - 52

DOI: https://doi.org/10.2478/auseb-2020-0003

Mots clés
promoters, institutions, beta, Nifty-500

© 2020 Ranjita Kumari et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Ownership Structure and the Risk: Analysis of Indian Firms

Publié en ligne: 14 oct. 2020

Pages: 39 - 52

DOI: https://doi.org/10.2478/auseb-2020-0003

Mots cléspromoters, institutions, beta, Nifty-500

© 2020 Ranjita Kumari et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Mots clés
promoters, institutions, beta, Nifty-500