The Impact of Ownership Concentration on Firm Value. Empirical Study of the Bucharest Stock Exchange Listed Companies

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The aim of this study consists in providing the first empirical evidence for the companies listed in Romania regarding the influence of ownership concentration on firm value. The empirical research was employed for a sample of companies listed on the Bucharest Stock Exchange (BSE), over the period 2007-2011, being estimated multivariate regression models for panel data, unbalanced, with fixed effects. The value of the companies was measured out by the instrumentality of Tobin's Q ratio, however adjusted with the purpose of taking into account the industry membership diversity of the selected sample. We considered distinctly the ownership of the first, the second, and the third largest shareholder, as well the sum of holdings of the two largest shareholders and the sum of holdings of the three largest shareholders. Therefore, the results sustain a lack of influence on firm value exhibited by the first largest shareholder, while the second largest shareholder positively influences firm value. By considering the ownership of the third largest shareholder we identified a positive influence, but down to a level of holdings of 13.08 percent, thereupon the influence becomes negative. Thereby, beyond the identified threshold we could perceive the reduction of the third largest shareholder’ concern regarding the process of directors’ monitoring, thus following the own aims’ achievement. Further, from the ownership concentration perspective only the sum of holdings of the three largest shareholders positively influences firm value. However, there was not identified any statistically significant relationship between the sum of holdings of the two largest shareholders and firm value. Accordingly, the results are influenced by the context of an underdeveloped Romanian capital market within the first largest shareholder ownership discourages the occurrence of another investors holding significant stakes.