Does corporate control matter to financial volatility?

Gianfagna, Laura and Rungi, Armando Does corporate control matter to financial volatility? EIC working paper series #9/2017 IMT School for Advanced Studies Lucca ISSN 2279-6894.

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Abstract

In our contribution we study how the ownership channel affects the stock price volatility of listed stock markets. In particular, we study how a linkage between a parent company and its affiliates may drive differences in stock price volatility, within and across countries. We exploit a worldwide dataset of stock-exchange listed firms, controlling for several financial dimensions, to assess whether business groups matter to financial volatility. The answer is positive and does not depend on the definition of volatility used. Our results contribute to the corporate finance literature by defining the role of multinational corporate control in financial markets, and to the financial stability literature by assessing corporate control as an undiscovered channel of transmission for financial shocks.

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