Determinants of Ownership Concentration: The Importance of Firm-, Industry- and Country-Level Factors

Abstract

We analyze the relative importance of firm-, industry-, and country-level factors as determinants of the level of ownership concentration of firms. Building particularly on the work of Demsetz & Lehn (1985), Thomsen & Pedersen (1999; 1997, 1998), and La Porta et al.(1998, 1999), we develop hypotheses and test them on a sample of 900 firms from nine countries, using hierarchical linear models. Our models explain up to 31% of the variance in the ownership concentration of firms. The results show that the firm- and the country-level influence ownership concentration significantly, whereas industry-level factors play an almost negligible role in this respect. Specifically, we find that the institutional context in which companies operate has a surprisingly large effect on the level of ownership concentration. Our results should spark further multi-level research on the relationship between environmental factors on the country level and the allocation of ownership rights in firms.