INVESTIGATING THE IMPACT OF DIFFERENT OWNERSHIP STRUCTURES ON FIRM RISK IN SRI LANKA: A STUDY OF 69 PUBLIC LISTED COMPANIES

Abstract

This study investigates the impact of ownership structure on firm risk of public listed companies in Sri Lanka. The study uses three types of ownership variables such as management ownership (MO), institutional ownership (IO), and concentrated ownership (CO) to analyze its effect on firm risk measures such as total risk, asset return risk, and financial risk from 2010 to 2017. The results reveal a significant negative association between management ownership and firm risk, while institutional and concentrated ownership exhibit a positive relation with firm risk. The findings stress the importance of corporate governance in mitigating the agency conflicts and determining the risk of firms. The study provides valuable insights into the optimal ownership structure for enhancing corporate performance through risk reduction to maximize wealth. The research scope was limited to 69 listed companies in Sri Lanka; hence, future researchers could expand the study by using a larger sample of companies, industries, and extending the research period. Furthermore, the study suggests that future researchers undertake sector-wise studies separately, exploring the relationships studied in this paper