Major shareholders’ trust and market risk: Substituting weak institutions with trust

This study examines the impact of foreign controlling shareholder trust on firm market risk using two measures total and idiosyncratic risk. An extensive global sample 12,496 firm-year observations from 43 countries is employed. The results show that firms controlled by trusting shareholders display lower levels in both measures. Trust appears more important for based with a less favourable institutional environment, whereby it varies investment horizon shareholders. are robust after cultural measures, endogeneity, selection bias alternate model specifications.