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The Impact of Shareholder Perks on Risks of Stocks: Role of Small Investors

In this paper, we conducted an empirical analysis of the impact of implementation of shareholder perks, which attract small investors, on the risks of Japanese stocks. We tested hypotheses on the impact of implementation of shareholder perks on cost of equity capital, idiosyncratic risk, stock price crash risk, turnover rate by using annual panel data. The main results are as follows. Implementing shareholder perks reduces cost of capital, volatility, and idiosyncratic risk, while implementation of perks results in increase in individual stock price crash risk. The results mean that an increase in small shareholders by initiating perks raises advantage in reduction of risks as well as .disadvantage in increase of stock price crash risks.