Large Shareholders And Corporate Risk-taking Behavior

The background of China’s transition economy and special ownership structure of listed companies provides a good opportunity for the study about multiple large shareholders of mutual checks and balances mechanism. In recent years, the scholars’ reserch shows that not only due to the dominance and dispersed ownership structure in the capital markets, but also widespread multiple large shareholders equity structure. The domestic research on large shareholders and corporate risk taking is less. Since the equity structure of multiple large shareholders is becoming more and more common in the listed companies. What is the impact of multiple large shareholders on the corporate risk-taking compared with the one dominant shareholder ownership structure? Based on the above reason, this article is on the perspective of large shareholders makes an empirical analysis on risk-taking, chooses the 2003-2013 weeks yield the annualized standard deviation of the listed companies as the measure of the companys’ total risk-taking, and choose the Fama- French residual standard deviation of the three factor regression model to measure the companys’ non systemic risk-taking to do the empirical analysis. This article found that except the dominant large shareholder, the existence, number and shareholding ratio of other large shareholders is positively related to the level of corporate risk-taking. Accordingly, when the company has only one dominant large shareholder will reduce risk-taking, and the greater the separation of the control right and cash flow right of the dominant shareholder is negatively related to the level of corporate risk-taking.There is a big difference on corporate governance mechanism between private listed companies and state-owned listed companies, this article adding a dummy variable to the original regression model to test the difference on relationship of large shareholders and risk-taking between state-owned listed companies and private listed companies. The empirical results show that the multiple large shareholders have more obvious influence on the private listed companies. Finally, in order to verify the risk-taking for the development of the company in the end is good or bad, this paper examines the relationship between corporate risk-taking and growth, and chooses Tobin’s Q as a measure of the companys’ growth indicators and confirm the significant positive correlation of risk-taking and the growth. In order to exclude the impact of changes in the macroeconomic environment, this paper eliminate the 2008 samples, and the rest of the sample is divided into 2003-2007, 2009-2013 two sub samples for analysis of robustness, the results support the reliability of the empirical conclusions.In conclusion, the rest of the large shareholders except the dominant large shareholder can change the original imbalanced right of the dominant shareholder. And other large shareholders have the motivation and ability to ease the company’s largest shareholder transfer resources, at the same time they are the effective supervisors on management and reduce the private interests of access behavior of largest shareholder. Thus the existence of other large shareholders will improve the level of corporate risk-taking and protect the interests of small shareholders.