A firms appetite to take risk when exposed to a growth opportunity is vital to its
long-term performance. This article focuses on establishing relationships between
the level of equity ownership by different stakeholders with corporate risk taking. This article identifies three different stakeholders of the firm namely corporate insiders, blockholders (passive as well as active), and institutional investors and their influence on the risk taking potential. The author put forward six hypotheses and tried to test them empirically. Primarily, the author cites different theories and their divergence in views about the effect of the level of ownership by corporate insiders and their potential effect on the risk taking ability of the firm. Various theories proposed that with an increase in the level of ownership, corporate risk taking increases because the corporate insiders wants to align their interests with that of the shareholders in order to enhance their wealth. But some theories suggest that with an increase in insiders wealth in the firm, the risk appetite of the insider decreases since its wealth becomes more concentrated. The author has cleverly linked it with diversification, divestments, mergers and corporate restructuring strategies. The empirical studies have also validated author hypothesis that the relationship between the level of ownership and the corporate risk taking is positive till 7.5% and beyond that it reduces. The author then cited various theories validating the fact that the blockholders and institutional investors exert heavy influence in the firms risk taking decisions when provided with growth opportunities. Various theories assert that with an increase in the level of ownership by blockholders and institutional investors, corporate risk taking increases. However, the empirical results have invalidated the relationship between blockholder and the corporate risk taking while validated the latter relationship. This theory explains why there are altercations between managers and stakeholders regarding various issues such as Mergers, when shareholders would see firms growth potential, but managers aka corporate insiders would give precedence to their own profitability depending upon the level of ownership they hold in the firm. This is a typical example of agency costs problem.