The Effect of Institutional Ownership on the Relationship between Risk Appetite and Financial Performance
Sedigheh Nazari, MaryamBasati, Babak Jamshidinavid
One of the major factors affecting the companies' performance is their risk appetite. Regarding the cost-benefit considerations, institutional ownership can be of great worth to shareholders and affect the company's performance and the exposure of investors to risk. This study aimed to examine the effect of institutional ownership on the relationship between risk appetite and financial performance. To this end, two hypotheses were formulated, in which institutional ownership, risk appetite, and financial performance were assumed as moderator, independent and dependent variables. The statistical population of the study consisted of the companies listed in Tehran Stock Exchange, which were selected based on systematic sampling method. The study sample included 165 companies being listed during 2012 to 2016. The research method of this descriptive survey was causal-correlational in terms of the relationship between variables and applied with regard to the study objective. The regression method and panel data as well as the fixed effect model were used to process and test the hypotheses. The findings for the first hypothesis indicated that there is a positive and significant relationship between risk appetite and financial performance. Concerning the second hypothesis, institutional ownership has a positive and significant impact on the relationship between risk appetite and financial performance at0.05. It was also found that the control variable of the company’s size has a positive and significant relationship with financial performance and that financial leverage was also positively and significantly correlated with financial performance. The shareholders are recommended to pay attention to the ownership structure of companies when deciding to purchase shares since the proper ownership structure improves monitoring the selection of investment options.