Corporate Ownership Structure and Firm Performance: evidence from Greek firms

Abstract

The Berle‐Means thesis (1932 The Modern Corporation and Private Property. New York: Harcourt, Brace and World) implies that diffuse ownership adversely affects firm performance. This paper tries to investigate whether there is strong evidence to support the notion that variations across firms in observed ownership structures result in systematic variations in observed firm performance. We test this hypothesis by assessing the impact of the structure of ownership on corporate performance, measured by profitability, using data for 175 Greek listed firms. Following Demsetz and Villalonga (2001 Ownership Structure and Corporate Performance, Journal of Corporate Finance, 7, 209–233), we model ownership structure, first, as an endogenous variable and, second, we consider two different measures of ownership structure reflecting different groups of shareholders with conflicting interests. Empirical findings suggest that a more concentrated ownership structure positively relates to higher firm profitability. We also find that higher firm profitability requires a less diffused ownership.