Ownership Concentration and Institutional Quality: Do They Affect Corporate Bankruptcy Risk?

Using the Worldwide Governance Indicators and enterprise survey data from the World Bank in 41 countries, this paper explores the relationship between ownership concentration and institutional quality and their association with corporate bankruptcy risk. The analytical results indicate an inverse relationship, suggesting that concentrated ownership is higher in countries with lower governance quality. This paper also finds that ownership concentration and institutional quality reduce bankruptcy risk and that in countries with stronger institutional quality, concentrated ownership has a weaker effect on bankruptcy risk. This implies that ownership concentration as a corporate governance mechanism can play a substituting role for weak governance quality and that such a role is more significant in countries with weaker institutional quality.