The Role of Ownership Concentration and Debt in Downturns: Evidence from Brazilian Firms During the 2008-9 Financial Crisis

This article aims to reconcile conflicting literature about the role of ownership concentration in the responsiveness of stock prices to macroeconomic shocks. We modified a previous theoretical model, adding leverage as a disciplining device. An important implication of our model is that only in deep crises ownership concentration plays a role in attenuating the effect of macroeconomic shock on firm value. We test this hypothesis using a sample of Brazilian firms during distinct phases of the 2008-9 crisis. Our empirical analyzes shows that only in the most critical part of the crisis, ownership concentration reduced the negative effects of the financial crisis.