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Persistence of past: Impact of historical institutions on corporate risk taking

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  • Raithatha, Mehul
  • Popli, Manish

Abstract

Using the context of institutional transitions in the emerging economy context of India, we examine the influence of a firm's historical economic policies on its corporate risk-taking. We propose that protectionist and constraining economic policies of the socialist regime inscribe ‘risk-avoidance’ routines on incumbent firms, which continue to persist. Utilizing the data of the Indian economic environment (1956–1991) and analyzing a large sample of Indian firms during 1994–2007, we hypothesize and find the support that level of protectionist imprinting negatively impacts corporate risk-taking in the post-liberalization era. This effect is weakened by the moderating impact of the business group affiliation.

Suggested Citation

  • Raithatha, Mehul & Popli, Manish, 2022. "Persistence of past: Impact of historical institutions on corporate risk taking," Finance Research Letters, Elsevier, vol. 45(C).
    • Handle: RePEc:eee:finlet:v:45:y:2022:i:c:s1544612321002658
    DOI: 10.1016/j.frl.2021.102195
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    References listed on IDEAS

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    3. Pu, Guifang & Xie, Yanxiang & Wang, Kai, 2023. "Board faultlines and risk-taking," Finance Research Letters, Elsevier, vol. 51(C).

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