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Corporate Risk-Taking in Privatized Firms: International Evidence on the Role of State and Foreign Owners

Author

Listed:
  • Narjess Boubakri
  • Jean-Claude Cosset
  • Walid Saffar

Abstract

Using a unique database of 190 newly privatized firms from 36 countries, we investigate the impact of shareholders’ identify on corporate risk-taking behavior. We find strong and robust evidence that state (foreign) ownership is negatively (positively) related to corporate risk-taking. Moreover, we find that these relations depend on the level of government extraction. Our results suggest that relinquishment of government control, openness to foreign investment, and improvement of country-level governance institutions are key factors in the success of privatization reform.

Suggested Citation

  • Narjess Boubakri & Jean-Claude Cosset & Walid Saffar, 2011. "Corporate Risk-Taking in Privatized Firms: International Evidence on the Role of State and Foreign Owners," Cahiers de recherche 1110, CIRPEE.
  • Handle: RePEc:lvl:lacicr:1110
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    File URL: http://www.cirpee.org/fileadmin/documents/Cahiers_2011/CIRPEE11-10.pdf
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    Keywords

    Privatization; risk-taking; corporate governance;

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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