Corporate Ownership Structure and Firm Risk: Empirical Evidence from Listed Companies in Sri Lanka

Abstract

This study examines the relationship between ownership structure and firm risk of 69 public listed companies in Sri Lanka over the period of 2010 to 2017.This study consists Management Ownership (MO), Institutional Ownership (IO) and Concentrated Ownership (CO) as ownership variables and total risk, asset return risk and financial risk as the measure of firm risk. The study was conducted as a quantitative study based on secondary data collected from annual reports. Regression model was used to examine the relationship between ownership structure and firm risk. Result depicts that the management ownership shows negative and significant relation on firm risk. On the other hand, institutional and concentrated ownership structure shows positive relation with firm risk. The finding highlights that management owners prefer not to bear high risk due to uncertainty of the business. Meantime, institutional owners and concentrated owners are steering to mitigate high risk in order to gear up the wealth maximization.