"The Role of Large Shareholders in Corporate Risk and its Impact on Value in Times of Crisis"

Abstract

"Prior to the financial collapse in 2007, many organizations took advantage of opportunities created by deregulation and made potentially bad decisions regarding the worth of their endeavors. It was vital to note that as a result of deregulation and massive amounts of leveraged financing, the growth cycle of business was faster than anticipated (Palley, 2011, 2019). However, the eventual outcome of this situation is a national recession. Therefore, the body of research on increased levels of risk-taking has linked increased levels of value creation to the nature of ownership structures during difficult economic conditions. Many companies resorted to adopting risk-taking to add incremental gain to their profits during the 2007 economic crisis due to the enormous drop in earnings associated with the financial downturn. The purpose of this research is to explore the relationship between corporate risk and value creation within the context of the 2007–2012 global financial crisis period, which provides a structurally relevant setting to analyze corporate risk-taking behavior under extreme financial stress. Additionally, the analysis will examine the potential moderating effect of corporate ownership structure on the relationship between corporate risk and value creation. The primary goal of this research will be to demonstrate that concentrated ownership does not produce value-creating activities, rather, concentrated ownership will decrease the value of an organization, as large shareholders can take advantage of the wealth of small shareholders during economic instability. Although the dataset corresponds to a historical period, its relevance lies in capturing extreme market conditions where risk, governance failures, and value destruction mechanisms become more visible than in stable periods. Copyright © 2026, AfricaGrowth Institute. All rights reserved"