Ownership structure and firm performance in non-listed firms: Evidence from Spain

Abstract

This study provides new evidence regarding the way in which ownership concentration influences non-listed firm performance focusing on the conflict between majority and minority shareholders, and differentiating between the behavior of family and non-family firms, using data from 586 non-listed Spanish firms. In first-generation family firms our research shows that agency theory can be used to explain the role of ownership concentration in balancing conflicts between shareholder groups. A greater concentration of firm ownership in the first generation may bring the monitoring and expropriation hypotheses into play, whereas firms in which subsequent generations have joined may show a greater spread of ownership. In first generation family firms, the classic owner-manager conflict is mitigated due to the large shareholder's greater incentives to monitor the manager. However, a second type of conflict appears. The large shareholder may use its controlling position in the firm to extract private benefits at the expense of the small shareholders. The empirical evidence shows that for family firms, the relationship between ownership concentration and firm performance differs depending on which generation of the family manages the firms.