TY - JOUR
T1 - Institutional ownership and corporate risk-taking in Japanese listed firms
AU - Sakawa, Hideaki
AU - Watanabel, Naoki
AU - Duppati, Geeta
AU - Faff, Robert
N1 - Funding Information:
The earlier version of this article was presented at Finance Workshop in Hitotsubashi University and 31st Asian Finance Association Annual Meeting. We thank Kotaro Inoue, Tahatoshi Ito, Tanapond Swanpitak, Toshio Tamura, Yukihiro Yasuda and all the participants at the workshop and the meeting. This research was financially supported by the Murata Science Foundation and the Japan Ministry of Education, Culture, Sports, Science and Technology (Grants-in-Aid for Young Scientists A; 17H04784), and Grant-in-aid for research in Nagoya City University (No. 2021201). On behalf of all authors, the corresponding author states that there is no conflict of interest.
Publisher Copyright:
© 2021 Informa UK Limited, trading as Taylor & Francis Group.
Copyright:
Copyright 2021 Elsevier B.V., All rights reserved.
PY - 2021
Y1 - 2021
N2 - Agency theory predicts that institutional ownership plays an important role in monitoring corporate risk-taking. This study examines this ownership-risk taking linkage in Japan over the period 2007 and 2019. We proxy risk through measures of idiosyncratic risk, total risk, and market beta. We show that (relational) foreign institutional shareholdings (do not) induce corporate risk-taking, thereby mitigating (preserving) the managerial ‘quiet life’ in Japanese corporations. Using 2SLS analysis, the roles of institutional shareholders are robust to endogeneity concerns. Finally, we also confirm robustness using alternative accounting-based risk proxies such as the standard deviation of Tobin’s Q and ROA. Our study implies that the monitoring of institutional shareholders is important in Japanese corporations whose top executives might be prone to seek a ‘quiet life’.
AB - Agency theory predicts that institutional ownership plays an important role in monitoring corporate risk-taking. This study examines this ownership-risk taking linkage in Japan over the period 2007 and 2019. We proxy risk through measures of idiosyncratic risk, total risk, and market beta. We show that (relational) foreign institutional shareholdings (do not) induce corporate risk-taking, thereby mitigating (preserving) the managerial ‘quiet life’ in Japanese corporations. Using 2SLS analysis, the roles of institutional shareholders are robust to endogeneity concerns. Finally, we also confirm robustness using alternative accounting-based risk proxies such as the standard deviation of Tobin’s Q and ROA. Our study implies that the monitoring of institutional shareholders is important in Japanese corporations whose top executives might be prone to seek a ‘quiet life’.
UR - http://www.scopus.com/inward/record.url?scp=85099826055&partnerID=8YFLogxK
U2 - 10.1080/00036846.2020.1854450
DO - 10.1080/00036846.2020.1854450
M3 - Article
AN - SCOPUS:85099826055
VL - 53
SP - 1899
EP - 1914
JO - Applied Economics
JF - Applied Economics
SN - 0003-6846
IS - 16
ER -