Block-ownership structure, bank nominee director and crash-risk

Yogesh Chauhan; Kavita Wadhwa; Sudhakar Reddy Syamala; Abhinav Goyal

doi:10.1016/j.frl.2015.07.002

Block-ownership structure, bank nominee director and crash-risk

Yogesh Chauhan, Kavita Wadhwa, Sudhakar Reddy Syamala, Abhinav Goyal^*

^*Corresponding author for this work

Finance

Research output: Contribution to journal › Article › peer-review

8 Citations (Scopus)

Abstract

We study the effect of outside block-ownership on the future firm-specific crash-risk of Indian firms. Major and dedicated block-owners play a significant role in aggravating the firm's susceptibility towards crash-risk. Within a novel regulatory setup in India, where borrowing firms are entitled to a bank nominated board-member, we find an ancillary influence of bank nominee's presence in dissipating block-owners influence on firm-level crash-risk. These results support the monitoring hypothesis in alleviating future firm-level crash-risk. Our results are robust to alternate model specifications, different crash-risk and block-ownership measures, clustering, and an array of control variables.

Original language	English
Pages (from-to)	20-28
Number of pages	9
Journal	Finance Research Letters
Volume	14
DOIs	https://doi.org/10.1016/j.frl.2015.07.002
Publication status	Published - 1 Aug 2015

Bibliographical note

Publisher Copyright:
© 2015 Elsevier Inc.

Keywords

Agency problem
Bank nominee
Block-ownership
Crash-risk

ASJC Scopus subject areas

Finance

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10.1016/j.frl.2015.07.002

Cite this

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title = "Block-ownership structure, bank nominee director and crash-risk",

abstract = "We study the effect of outside block-ownership on the future firm-specific crash-risk of Indian firms. Major and dedicated block-owners play a significant role in aggravating the firm's susceptibility towards crash-risk. Within a novel regulatory setup in India, where borrowing firms are entitled to a bank nominated board-member, we find an ancillary influence of bank nominee's presence in dissipating block-owners influence on firm-level crash-risk. These results support the monitoring hypothesis in alleviating future firm-level crash-risk. Our results are robust to alternate model specifications, different crash-risk and block-ownership measures, clustering, and an array of control variables.",

keywords = "Agency problem, Bank nominee, Block-ownership, Crash-risk",

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T1 - Block-ownership structure, bank nominee director and crash-risk

AU - Chauhan, Yogesh

AU - Wadhwa, Kavita

AU - Syamala, Sudhakar Reddy

AU - Goyal, Abhinav

PY - 2015/8/1

Y1 - 2015/8/1

N2 - We study the effect of outside block-ownership on the future firm-specific crash-risk of Indian firms. Major and dedicated block-owners play a significant role in aggravating the firm's susceptibility towards crash-risk. Within a novel regulatory setup in India, where borrowing firms are entitled to a bank nominated board-member, we find an ancillary influence of bank nominee's presence in dissipating block-owners influence on firm-level crash-risk. These results support the monitoring hypothesis in alleviating future firm-level crash-risk. Our results are robust to alternate model specifications, different crash-risk and block-ownership measures, clustering, and an array of control variables.

AB - We study the effect of outside block-ownership on the future firm-specific crash-risk of Indian firms. Major and dedicated block-owners play a significant role in aggravating the firm's susceptibility towards crash-risk. Within a novel regulatory setup in India, where borrowing firms are entitled to a bank nominated board-member, we find an ancillary influence of bank nominee's presence in dissipating block-owners influence on firm-level crash-risk. These results support the monitoring hypothesis in alleviating future firm-level crash-risk. Our results are robust to alternate model specifications, different crash-risk and block-ownership measures, clustering, and an array of control variables.

KW - Agency problem

KW - Bank nominee

KW - Block-ownership

KW - Crash-risk

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EP - 28

JO - Finance Research Letters

JF - Finance Research Letters

ER -

Block-ownership structure, bank nominee director and crash-risk

Abstract

Bibliographical note

Keywords

ASJC Scopus subject areas

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