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

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

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Authors

Jonathan A. Batten

Ahmet Faruk Aysan



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

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