Journal
JOURNAL OF FINANCIAL ECONOMICS
Volume 108, Issue 3, Pages 641-658Publisher
ELSEVIER SCIENCE SA
DOI: 10.1016/j.jfineco.2012.12.007
Keywords
Privatization; Risk-taking; Corporate governance
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Using a unique database of 381 newly privatized firms from 57 countries, we investigate the impact of shareholders' identity on corporate risk-taking behavior. We find strong and robust evidence that state (foreign) ownership is negatively (positively) related to corporate risk-taking. Moreover, we find that high risk-taking by foreign owners depends on the strength of country-level governance institutions. Our results suggest that relinquishment of government control, openness to foreign investment, and improvement of country-level governance institutions are key determining factors of corporate risk-taking in newly privatized firms. (C) 2012 Elsevier B.V. All rights reserved.
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