Abstract
Our study addresses the link between ownership concentration and corporate performance in the manufacturing sector in the European Union in an economic environment stressed by the global financial and sovereign debt crises. This is, to our knowledge, the first attempt to tackle differences between companies with different origin-countries in EU from the perspective of ownership concentration and corporate performance in a period marked by the adverse impact of the global financial crisis. Ownership concentration is measured by the number of shareholders and the percentage of their individual and collective holdings, while performance is measured by accounting-based and market-based indicators. Our results, based on a detailed and methodical statistical analysis, show a clear division between Western and Eastern companies in terms of ownership concentration and performance, with an impact on businesses’ recovery patterns. Overall, there is a positive link between ownership concentration and corporate performance in the case of Western companies, but not for Eastern-based companies. Moreover, ownership concentration has supported business recovery in EU, but particularly for Western companies. On the other hand, our results suggest that market investors’ assessment of corporate performance is disconnected from business fundamentals and do not acknowledge the role of ownership concentration (either beneficial of detrimental) for performance assessment.
Highlights
Our research investigates the link between ownership structure and corporate performance in a large sample of EU-based companies from the manufacturing sector
The research has three specific objectives, as follows: (i) to identify potential differences in the overall performance of Western versus Eastern EU-based companies depending on their degree of ownership concentration, after the global financial crisis of 2007–2009; (ii) to investigate potential dissimilarities in the link between ownership structure and performance between Western EU-based companies and Eastern EU-based companies; (iii) to study the patterns of economic recovery of these companies after the crisis in a framework shaped by different ownership structures
We describe the corporate performance of these companies by four widely-used financial indicators, accounting-based and market-based, each reflecting specific aspects of corporate activities and results, while the degree of ownership concentration is taken into account through an Independence indicator provided by Bureau van Dijk that has scarcely been used in the literature so far and considers the number of shareholders and the percentage of their individual and collective corporate holdings
Summary
Our research investigates the link between ownership structure and corporate performance in a large sample of EU-based companies from the manufacturing sector C-Manufacturing primary code) and focuses on the idiosyncrasies of this link for Western versus Eastern EU-based companies This division is interesting given the different economic structures of the two parts of EU, i.e., the developed part that includes mature market economies and the emerging or developing one that includes countries that shared a communist past but are in the process of building, with more or less success, advanced economies. The research has three specific objectives, as follows: (i) to identify potential differences in the overall performance of Western versus Eastern EU-based companies depending on their degree of ownership concentration, after the global financial crisis of 2007–2009; (ii) to investigate potential dissimilarities in the link between ownership structure and performance between Western EU-based companies and Eastern EU-based companies; (iii) to study the patterns of economic recovery of these companies after the crisis in a framework shaped by different ownership structures.
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