Do ownership structure mechanisms affect a firm’s risks? Evidence from Egypt

Document Type : Original Article

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Associate Professor of Finance and Management, Management department Faculty of Commerce Zagazig University Egypt

Abstract

This study examines the influence of ownership structure mechanisms as a determinant of corporate governance quality on a firm’s risks. Eight variables were used as proxies for the ownership structure practices. Our sample includes most non-financial firms listed on the Egyptian Exchange in 2014–2018. The least absolute value estimator was used to examine the influence of ownership structure mechanisms. Our findings reveal a significant positive impact of ownership concentration on a firm’s unsystematic risk, but a negative effect on its systematic risk. Institutional ownership and a firm’s total risk have a significant negative relationship. Managerial ownership is positively associated with systematic risk. Firm size as a control variable has a significant negative impact on unsystematic risk and total risk. Return on assets adversely influences systematic risk and total risk. Our findings may help managers and practitioners to understand and modify ownership structure mechanisms to better control a firm’s risks.
 

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