scholarly journals Corporate ownership structure and risk-taking: evidence from Japan

2017 ◽  
Vol 6 (4) ◽  
pp. 39-52 ◽  
Author(s):  
SunEae Chun ◽  
MinHwan Lee
Keyword(s):  
Financial Institutions ◽  
Ownership Structure ◽  
Risk Taking ◽  
Pension Funds ◽  
Insurance Companies ◽  
Risk Level ◽  
Managerial Ownership ◽  
Firm Risk ◽  
Concentrated Ownership ◽  
Corporate Risk

We examine the relationship between ownership structure and corporate risk-taking in Japan over the sample periods of 2000 2010. Reflecting the ongoing changes in the ownership structure in Japan, we incorporate the various kinds of insider and outsider ownership in the analysis. Ownership such as concentrated ownership, ownership by closely related parties, financial institutions comprising banks and insurance companies and managers are categorized into inside ownership, while ownership by foreigners or financial institution such as investment trusts or pension funds are categorized into outside ownership. The ownership structure is found to have a different impact on the firm’s risk-taking behavior. The study shows that concentrated ownership or ownership by closely related parties affect the firm risks in a convex manner and encourages the firm management to take more risk when the firms have growth opportunities. On the other hand, ownership by financial institutions such as bank and insurance companies, does not seem to affect the firm risk level. This implies that the financial institutions fail to play their role of a shareholder monitor. When managerial ownership is allowed, it is found that Japanese managers’ incentives are aligned with those of shareholders. Contrary to the conventional entrenchment hypothesis, however, managers seem to take more risk as the share of managerial ownership increases. Foreign investors are found to enhance corporate risk-taking in a monotonic manner and do not bias corporate investment in a conservative direction in pursuit of their short-term gains. Domestic institutions such as investment trusts or pension funds are found to neither affect the firm risk level nor enhance the firm value.

Which formula for corporate risk-taking around the world? Exploring happiness as the “black box”

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Thao Phuong Tran ◽  
Anh-Tuan Le
Keyword(s):  
Risk Taking ◽  
Negative Influence ◽  
Current Debate ◽  
Alternative Measure ◽  
Firm Risk ◽  
Content Type ◽  
Financial Decisions ◽  
The World ◽  
Corporate Risk

PurposeThis paper examines how the degree of happiness affects corporate risk-taking and the moderating influence of family ownership of firms on this relationship.Design/methodology/approachThe authors use an international sample of 17,654 firm-year observations from 24 countries around the world from 2008 to 2016.FindingsUsing the happiness index from the World Happiness Report developed by the United Nations Sustainable Development Solutions Network, the authors show that a country's overall happiness is negatively correlated with risk-taking behavior by firms. The findings are robust to an alternative measure of risk-taking by firms. Further analyses document that the negative influence of happiness on firm risk-taking is more pronounced for family-owned firms.Practical implicationsThe paper is consistent with the notion that happier people are likely to be more risk-averse in making financial decisions, which, in turn, reduces corporate risk-taking.Originality/valueThis study contributes to the broad literature on the determinants of corporate risk-taking and the growing literature on the role of sentiment on investment decisions. The authors contribute to the current debate about family-owned firms by demonstrating that the presence of family trust strengthens the negative influence of happiness on corporate risk-taking, a topic that has been unexplored in previous studies.

scholarly journals Impact of Ownership Structure on Bank Risk Taking: A Comparative Analysis of Conventional Banks and Islamic Banks of Pakistan

2021 ◽  
Vol 4 (1) ◽  
pp. 175-181
Author(s):  
ARIF HUSSAIN ◽  
DR. ALAM REHMAN ◽  
AQSA SIDDIQUE ◽  
HASEEB UR REHMAN
Keyword(s):  
Ownership Structure ◽  
Risk Taking ◽  
Positive Impact ◽  
Institutional Ownership ◽  
Foreign Ownership ◽  
Bank Risk ◽  
Managerial Ownership ◽  
Islamic Banks ◽  
Block Holders ◽  
Conventional Banks

This study is about the impact of ownership structure on bank risk taking with comparison between conventional banks and Islamic banks of Pakistan. Z-Score and SDROA are used as risk taking variables. While managerial ownership, institutional ownership, foreign ownership and block holders were taken as proxies for ownership structure. Ten private commercial banks and four Islamic banks were randomly selected and data have been collected from annual reports of these banks from 2010 to 2016. The result suggested that all the proxies of ownership structure i.e. managerial ownership, institutional ownership, foreign ownership and block holders have significant positive impact on Z-Score. On the other hand using SDROA as proxy for risk taking the proxies of managerial ownership has significant positive impact on SDROA and institutional ownership has significant negative impact on SDROA of banks in Pakistan. On the other hand foreign ownership and block holders have insignificant impact on SDROA. The result of BankID is significant which shows that ownership structure has significant impact on bank risk taking in conventional banks while in Islamic banks ownership structure doesn’t have any significant impact on bank risk.

scholarly journals The impact of company-specific and external factors on corporate risk taking: The case of Egyptian insurance companies

2013 ◽  
Vol 10 (3) ◽  
pp. 210-225
Author(s):  
Mohamed Sherif ◽  
Mahmoud Elsayed
Keyword(s):  
Risk Taking ◽  
Stock Prices ◽  
Risk Measures ◽  
External Factors ◽  
Insurance Companies ◽  
Method Of Moment ◽  
Life Insurers ◽  
Systematic Risks ◽  
Corporate Risk ◽  
The Impact

Using a two-way panel regression analysis with fixed and random effects and the generalized method of moment(GMM), we investigate the impact of both firm-specific and external factors on the risk taking of Egyptian insurance companies. We use hand-collected data of Egyptian insurance companies over the period from 2006 to 2011 to estimate the relationship between total and systematic risks as risk measures and the independent variables. Following Eling and Mark (2011) the extent of risk taking is quantified through variations in stock prices and these are explained by firm-specific and external factors. We find that differences in company size, interest rate level and economic development affect variations in stock prices. The analysis also highlights differences between the life and non-life insurers, with the non-life insurers exhibiting a higher level of risk (market and premium) and board independence. The pattern of results are qualitatively the same for non-life insurers but different for life insurers when we use GMM method.

The effects of ownership concentration and corporate governance on corporate risk-taking

2019 ◽  
Vol 33 (1) ◽  
pp. 252-267 ◽  
Author(s):  
Seksak Jumreornvong ◽  
Sirimon Treepongkaruna ◽  
Panu Prommin ◽  
Pornsit Jiraporn
Keyword(s):  
Corporate Governance ◽  
Risk Taking ◽  
Ownership Concentration ◽  
Corporate Policies ◽  
Content Type ◽  
Instrumental Variable Analysis ◽  
Developed Economies ◽  
Concentrated Ownership ◽  
Corporate Risk ◽  
Variable Analysis

Purpose This study aims to investigate the effects of ownership concentration and corporate governance on the extent of risk-taking in an important emerging economy – Thailand. Design/methodology/approach The results are corroborated by additional analysis, including an instrumental-variable analysis and propensity score matching. Findings Large owners are under-diversified and are thus more vulnerable to the firm’s idiosyncratic risk. Therefore, they tend to advocate less risky corporate policies and strategies. Consistent with this notion, the authors find that more concentrated ownership induces firms to take significantly less risk. Originality/value Ownership in Thai firms is substantially more concentrated than that in developed economies, providing a unique opportunity to study the effect of highly concentrated ownership on risk-taking.

scholarly journals Corporate governance indicators and risk-taking

2011 ◽  
Vol 8 (4) ◽  
pp. 9-24
Author(s):  
Apostolos K. Apostolou ◽  
Maria-Eleni Agoraki
Keyword(s):  
Corporate Governance ◽  
Ownership Structure ◽  
Risk Taking ◽  
Information Quality ◽  
Econometric Model ◽  
Negative Impact ◽  
Audit Committees ◽  
Firm Risk ◽  
Governance Indicators ◽  
The Relationship

This paper analyzes the relationship between risk-taking and corporate governance indicators, in terms of board characteristics, financial information quality and ownership structure. Unlike previous studies, we apply a broad range of corporate governance indicators and use a suitable econometric model to solve for possible endogeneity issues. The empirical framework is applied to an industry-wide sample of UK firms during the period 2002-2009. We find that board size and more executives positively affect firm risk-taking, while independence in audit committees has a negative impact. Finally, introducing firm specific characteristics does not affect the robustness of the results.

scholarly journals Integration of environmental, social and governance principles in pension funds and insurance companies activities

VUZF Review ◽  
2020 ◽  
Vol 5 (3) ◽  
pp. 31-39
Author(s):  
Stanislav Dimitrov
Keyword(s):  
Climate Change ◽  
Financial Institutions ◽  
Action Plan ◽  
Pension Funds ◽  
Insurance Companies ◽  
The European Union ◽  
Good Corporate Governance ◽  
Potential Problems ◽  
Sustainable Finance

Sustainable finance has been one of the modern topics in recent years. The main reason is the growing need for active steps and measures to preserve nature and avoid the risks of climate change and its consequences. A basic concept in sustainable finance is the adoption and follow-up of ESG principles. The latter refers to environmental “E”, social “S” principles and good corporate governance “G” policies. Financial institutions are considered as the conductor of policies in the field of ESG principles. The European Union is following an action plan to implement these principles and policies in the financial sphere. This report examines the integration of ESG principles into the activities of insurance companies and capital pension funds. Potential problems are identified and possible solutions are presented.

scholarly journals Risk committee, corporate risk-taking and firm value

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Md. Borhan Uddin Bhuiyan ◽  
Muhammad A. Cheema ◽  
Yimei Man
Keyword(s):  
Risk Taking ◽  
Firm Value ◽  
Firm Risk ◽  
Content Type ◽  
Potential Risks ◽  
Risk Committee ◽  
Corporate Risk ◽  
The Impact ◽  
Practical Implications

PurposeThe authors empirically examine the impact of the stand-alone risk committee on corporate risk-taking and firm value.Design/methodology/approachThe authors argue that the existence of a stand-alone risk committee enhances the quality of corporate governance, which reduces corporate risk-taking and strengthens the firm value that might improve investor protection.FindingsThe authors find corporate risk-taking decline significantly for firms that have a stand-alone risk committee compared with firms that have a joint audit and risk committee. The authors also find that the presence of a stand-alone risk committee is positively associated with firm value.Practical implicationsThe evidence is consistent with the proposition that firms with a stand-alone risk committee can effectively evaluate potential risks and implement a proper risk management system.Originality/valueThis is the first paper that investigates the association between the existence of a stand-alone risk committee and firm risk-taking in a multi-industry setting. Also, our research extends the association between a stand-alone risk committee and firm value.

scholarly journals Ownership Structure and Principle-Agent Problem: Evidence from the U.S. Banking Industry

2008 ◽  
Vol 9 (1) ◽  
pp. 23-35
Author(s):  
Seok Weon Lee
Keyword(s):  
Ownership Structure ◽  
Risk Taking ◽  
Managerial Ownership ◽  
Bank Profitability ◽  
Risk Diversification ◽  
Holding Companies ◽  
Banking Regulations ◽  
Frequent Monitoring ◽  
Increased Risk ◽  
Degree Of Risk

From the sample of 62 U.S. bank holding companies over the 1987-1995 period, we found that banks with a higher degree of risk diversification significantly increase more risk as managerial stock ownership rises, compared to the banks with a lower degree of risk diversification over the period 1987-1990 when the banking regulations were relatively loose. However, we also found that this increased risk-taking has not ultimately resulted in better performance of the banks. Thus, even though the owner/manager agency problem of banks can easily be ad~ by changing their insider holdings or ownership structure, in particular when the banks' asset portfolios are well diversified and banking regulations are loose, this change in ownership structure may have to be associated with closer and more frequent monitoring of the banks’ risk-caking behavior, because the increased risk-taking with higher managerial ownership could only end up with increasing the possibility of failure of the bank without contributing to improving bank profitability.

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