Major Shareholders’ Trust and Market Risk: Substituting Weak Institutions with Trust

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

Abstract

This study examines the impact of foreign controlling shareholder trust on firm market risk using the 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 alternative model specifications

Citation

Abdelsalam, O., Chantziaras, A., Batten, J. A., & Aysan, A. F. (2021). Major Shareholders’ Trust and Market Risk: Substituting Weak Institutions with Trust. Journal of Corporate Finance, 66, Article 101784. https://doi.org/10.1016/j.jcorpfin.2020.101784

• Journal Article Type: Article
• Acceptance Date: Nov 11, 2020
• Online Publication Date: Nov 13, 2020
• Publication Date: 2021-02
• Deposit Date: Nov 11, 2020
• Publicly Available Date: May 13, 2022
• Journal: Journal of Corporate Finance
• Print ISSN: 0929-1199
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 66
• Article Number: 101784
• DOI: https://doi.org/10.1016/j.jcorpfin.2020.101784
• Public URL: https://durham-repository.worktribe.com/output/1285964