Ownership concentration and extreme downside risk: The mediating role of landbanking in property development firms

Abstract

This study examines how controlling ownership and landbanking intensity jointly influence firms’ exposure to extreme downside risk among publicly listed property development firms in Indonesia. The study extends the corporate governance literature by focusing on tail-risk outcomes and by identifying strategic asset allocation as an important mechanism linking ownership structure to corporate resilience. Using panel data from Indonesian listed property firms, extreme downside risk is measured by Expected Shortfall at the 5% level (ES5). Panel regression analysis is employed to test the relationships among controlling ownership, landbanking intensity and tail-risk exposure, while mediation analysis is used to assess the indirect effect of controlling ownership through landbanking decisions. The findings reveal that controlling ownership is negatively associated with both extreme downside risk and landbanking intensity, while landbanking intensity is negatively related to tail-risk exposure. Furthermore, the mediation results indicate partial mediation, suggesting that controlling shareholders strengthen firms’ resilience to severe market downturns both directly and indirectly through more disciplined landbanking strategies. These results imply that investors, managers and policymakers should jointly consider ownership structure and landbanking decisions when evaluating firms’ vulnerability to adverse market shocks. Governance mechanisms that encourage disciplined asset allocation may improve corporate resilience during periods of market stress. This study contributes to the literature by integrating corporate governance and real estate asset management in explaining firms’ exposure to extreme downside risk, and by conceptualizing landbanking as a governance-mediated real options mechanism through which ownership structures shape firm resilience.