Ownership Structure and the Risk: Analysis of Indian Firms

Ranjita Kumari; Nishant Kumar

doi:10.2478/auseb-2020-0003

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Ownership Structure and the Risk: Analysis of Indian Firms

Acta Universitatis Sapientiae, Economics and Business

Volume 8 (2020): Issue 1 (October 2020)

By: Ranjita Kumari and Nishant Kumar

Open Access

|Oct 2020

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.

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Articles in this issue

DOI: https://doi.org/10.2478/auseb-2020-0003 | Journal eISSN: 2360-0047 (formerly 2343-8894)

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Language: English

Page range: 39 - 52

Published online: Oct 14, 2020

Published in print: Oct 1, 2020

Published by: Sapientia Hungarian University of Transylvania

In partnership with: Paradigm Publishing Services

Publication frequency: 1 issue per year

Keywords:

beta,

JEL:

Related subjects:

Business and economics,

Political economics,

Economic theory, systems and structures

© 2020 Ranjita Kumari, Nishant Kumar, published by Sapientia Hungarian University of Transylvania
This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Volume 8 (2020): Issue 1 (October 2020)