Ownership Structure and Systematic Risk

This paper examines the relation between market risk, our measure for systematic risk, and ownership structure. For the overall sample ranging from 1983 to 2008, the correlation between market return and a firm's specific return is related to the holdings by its institutional investors. Specifically, there is a significantly positive relationship between market risk and institutional ownership, and a significantly negative relationship between market risk and institutional concentration. The results are robust to the inclusion of other firm-specific variables such as size, leverage, and liquidity measures.