Role of Institutional Owners in Devising Firms' Risk-Taking Behavior: Evidence From a Developing Economy

Role of institutional owners is becoming vital regarding strategic decision making in modern day business corporations. Financial institutions are capable to monitor the empowered company insiders and to regulate the capital market positioning of firms due to their specialized expertise and low cost of monitoring the managers. This article is an attempt to investigate the role of institutional owners on firms' risk-taking behavior in an emerging market. By using the sample of 58 non-financial firms listed at Karachi Stock Exchane-100 (KSE-100) index for a period of 2010 to 2017, these results revealed that institutional ownership can influence firms risk taking decisions. This influence depends on type of institutional ownership; passive owners play negative role in risk taking while active owners play a positive role in risk taking. Size of institutional ownership does not matter in risk taking.