Abstract
ABSTRACT Purpose: The article aims to trace the behaviour of dispersed, dominant and concentrated ownership structures in Brazil and verify which of these structures is more efficient operationally and if there is a pattern to be followed. Originality/gap/relevance/implications: Static optimisation techniques are used by data envelopment analysis (DEA) to calculate the variable ‘efficiency', a differential in relation to previous studies that consider only outcome variables as a performance indicator. The article is one of the first in the area that traces the pattern of efficiency of ownership structures in Brazil. Key methodological aspects: The sample consists of 8,298 company years in the period between 1995 to 2012. To calculate the efficiency (dependent variable), static optimisation techniques were used by data envelopment analysis (DEA). After, the unbalanced panel data by GMM-Sys (system generalised method of moments) is applied to identify the influence of dispersed, dominant and concentrated ownership structures on efficiency. Summary of key results: The results showed that, although all the variables are positively related to efficiency, the graphic presented an inverted "U" format, i.e. dispersed and concentrated structures, mostly, are less efficient than dominant. Key considerations/conclusions: The study identifies that both agency problems and the expropriation of minority shareholders by the majority, stemming from weak legal protection in the country, significantly affect the efficiency of Brazilian companies, thus making dominant structures the most appropriated form of ownership structure in Brazil.
Highlights
The relation between ownership structure and corporate performance is a controversial subject widely explored by academia. Aldrighi and Mazzer (2007) argue that assessing the benefits and costs of a greater concentration of ownership can be rationalised in terms of the trade-off between incentives to monitor executives and gains—liquidity and diversification of the risk to its wealth.For Jensen and Meckling (1976), the concentrated ownership structure has the potential to limit agency problems due to more efficient monitoring since the concentration in the hands of a single shareholder generates incentives and great power to better monitor the business at a lower cost
Originality/gap/relevance/implications: Static optimisation techniques are used by data envelopment analysis (DEA) to calculate the variable ‘efficiency’, a differential in relation to previous studies that consider only outcome variables as a performance indicator
To calculate the efficiency, static optimisation techniques were used by data envelopment analysis (DEA)
Summary
The relation between ownership structure and corporate performance is a controversial subject widely explored by academia. Aldrighi and Mazzer (2007) argue that assessing the benefits and costs of a greater concentration of ownership can be rationalised in terms of the trade-off between incentives to monitor executives (which may result in the creation of value for the firm) and gains—liquidity and diversification of the risk to its wealth (the renunciation of which may incite the search for ‘private benefits of control’). This fact suggests that a highly concentrated structure may not be optimal for shareholders (La Porta, Lopez-De-Silanes, & Shleifer, 1999) For this reason, Pedersen and Thomsen (1997) argue that ownership structure is highly dependent on regulation and the institutions prevailing in market economies. Countries with common laws (e.g. USA, UK, among others) have more protection for shareholders, leading to fewer minority expropriations; countries with French civil law (e.g. Brazil, Belgium, France, among others), German civil law (e.g. Japan, Germany, Austria, among others) and Scandinavian civil law (e.g. Denmark, Finland, Switzerland, among others) have less protection, facilitating the expropriation of minority shareholders As a result, these countries end up having smaller and less developed capital markets. These authors have neglected the fact that the strategic focus of an organisation is its operational function, that is, the process of transforming inputs into outputs. Margaritis and Psillaki (2010) and Wang, Lu, and Lin (2012) used the efficiency calculation through data envelopment analysis to identify the influence of governance on company performance
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