Major shareholders’ trust and market risk: Substituting weak institutions with trust

Omneya Abdelsalam; Antonios Chantziaras; Jonathan A. Batten; Ahmet Faruk Aysan

doi:10.1016/j.jcorpfin.2020.101784

Major shareholders’ trust and market risk: Substituting weak institutions with trust

Omneya Abdelsalam^*, Antonios Chantziaras, Jonathan A. Batten, Ahmet Faruk Aysan

^*Corresponding author for this work

Islamic Studies – Administration

Research output: Contribution to journal › Article › peer-review

25 Citations (Scopus)

Abstract

This study examines the impact of foreign controlling shareholder trust on firm market risk using two measures of total and idiosyncratic risk. An extensive global sample of 12,496 firm-year observations from 43 countries is employed. The results show that firms controlled by foreign trusting shareholders display lower levels of risk in both market measures. Trust appears more important for firms based in countries with a less favourable institutional environment, whereby it varies with the investment horizon of foreign controlling shareholders. The results are robust after controlling for cultural measures, endogeneity, selection bias and alternate model specifications.

Original language	English
Article number	101784
Journal	Journal of Corporate Finance
Volume	66
DOIs	https://doi.org/10.1016/j.jcorpfin.2020.101784
Publication status	Published - Feb 2021

Keywords

Controlling shareholder
Market risk
Return stability
Trust
Volatility

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10.1016/j.jcorpfin.2020.101784

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title = "Major shareholders{\textquoteright} trust and market risk: Substituting weak institutions with trust",

abstract = "This study examines the impact of foreign controlling shareholder trust on firm market risk using two measures of total and idiosyncratic risk. An extensive global sample of 12,496 firm-year observations from 43 countries is employed. The results show that firms controlled by foreign trusting shareholders display lower levels of risk in both market measures. Trust appears more important for firms based in countries with a less favourable institutional environment, whereby it varies with the investment horizon of foreign controlling shareholders. The results are robust after controlling for cultural measures, endogeneity, selection bias and alternate model specifications.",

keywords = "Controlling shareholder, Market risk, Return stability, Trust, Volatility",

author = "Omneya Abdelsalam and Antonios Chantziaras and Batten, {Jonathan A.} and Aysan, {Ahmet Faruk}",

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T2 - Substituting weak institutions with trust

AU - Abdelsalam, Omneya

AU - Chantziaras, Antonios

AU - Batten, Jonathan A.

AU - Aysan, Ahmet Faruk

PY - 2021/2

Y1 - 2021/2

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AB - This study examines the impact of foreign controlling shareholder trust on firm market risk using two measures of total and idiosyncratic risk. An extensive global sample of 12,496 firm-year observations from 43 countries is employed. The results show that firms controlled by foreign trusting shareholders display lower levels of risk in both market measures. Trust appears more important for firms based in countries with a less favourable institutional environment, whereby it varies with the investment horizon of foreign controlling shareholders. The results are robust after controlling for cultural measures, endogeneity, selection bias and alternate model specifications.

KW - Controlling shareholder

KW - Market risk

KW - Return stability

KW - Trust

KW - Volatility

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VL - 66

JO - Journal of Corporate Finance

JF - Journal of Corporate Finance

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Major shareholders’ trust and market risk: Substituting weak institutions with trust

Abstract

Keywords

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