Corporate Ownership Structure and Performance in Europe

Abstract

In this paper, we show that ownership structures vary considerably across the largest European economies, and that ownership has a significant impact on firm performance. We demonstrate that ownership structures in Europe are not necessarily consistent with value maximisation principles. Ultimately, the results show that dominant shareholders have a negative impact on long-term share price performance. These findings are in contradiction to similar research based on US samples. Our results remain robust after controlling for industry and country effects, size and the type of owner. We base our analysis on a new and unique dataset of uniform and reliable ownership data of the largest 100 public firms in the five major European economies. We quantify the differences in ownership by comparing three distinct ownership structures of firms, and relating them to performance. In addition to standard performance measures, we employ, for the first time, a Hodrick-Prescott Filter. This methodology is widely used in macroeconomics to isolate the trend growth components from cyclical fluctuations. Here it is deployed to estimate the share price trend of each firm.