Journal of Corporate Finance Vol. 66 2021
Major shareholders’ trust and market risk: Substituting weak institutions with trust
open access
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.
- DOI
- 10.1016/j.jcorpfin.2020.101784
- Volume
- 66
- Pages
- 101784
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref