Level Of Ownership Concentration Research Articles

Legal Person Ownership, Diversification Strategy and Firm Profitability in China

Legal person ownership is the second largest ownership identity in China’s public listed companies, yet it has received limited attention compared to the already extensive research on China’s state ownership. We investigate the relationships between the concentration of legal person shareholding, product diversification and firm performance for China’s listed companies. We find that relying on legal person shareholder as a lever for more profit-oriented governance cannot be an unqualified linear prescription, but it has this effect only if legal person shareholders have a high level of ownership concentration and are not in a minority ownership position.

Concentration of ownership and control as a governance mechanism in the Brazilian financial system

In this paper we analyse how ownership and control work in the main banks operating in Brazil. Our purpose is to identify the mechanisms through which investors try to secure the control of the corporations and the return of the capital invested. Unlike the Anglo-Saxon governance model, where the usual practice is to distribute the share capital among a large number of shareholders, or still, the Japanese or German models, with a massive participation of the banks in the control of the companies, recent research in the Brazilian companies listed in the stock exchange indicate a great volume of voting shares in the hands of a few shareholders. In the present study we seek to reveal whether this corporate governance mechanism also prevails in the Brazilian banking sector. The analysis comprised fifty of the biggest banks operating in Brazil, accounting for over 90% of the total assets of the Brazilian financial system. This study, besides revealing the levels of concentration of control and ownership of the leading Brazilian financial institutions, elucidates the corporate governance models featuring in the literature. It also explains how, in the management of the financial organizations, the investor, when making use of the mechanisms that secure their rights to ownership, guarantees the control and legal protection of his/her investment. The results of the research point to high levels of ownership concentration in the financial institutions in Brazil

Corporate governance: earnings management linkages: impact of audit committee composition and operational characteristics

Our study documents a comprehensive simultaneous analysis of the association between five-audit committee composition and operational characteristics features and earnings management based on a sample of 485 organisational-years of Singapore publicly traded organisations. Findings provide only partition support for the view organisations with a higher proportion of independent audit committee members are more effective at constraining earnings management. Organisations with audit committees that are more diligent and/or lack the presence of independent directors serving simultaneously on a substantial number of boards and committees are more effective at constraining earnings management. Audit committee expertise and the presence of a senior executive director on the committee do not appear to influence the committee's ability to constrain earnings management. Our findings are robust to alternative income-incentives facing corporate management and entices associated with different levels of ownership concentration. Overall, our findings are rich with policy and practical implications.

Change in the German Model of Corporate Governance: Evidence from Blockholdings 1997–2001

In order to research the dynamics of the German model of corporate governance, data pertaining to major holdings of voting rights in listed companies between 1997 and 2001 were examined. The change that took place in this short period of time is striking, with a falling level of ownership concentration, dissolving cross-holdings, and financial sector institutions losing their position as blockholders. The concentration of voting rights is lowest in companies included in the DAX30 stock-market index. Factors affecting the types of holders of voting rights in a company include the company size, age, economic sector, and location. The analysis shows that Germany made a quick step towards some aspects of the Anglo-American system of corporate governance. However, there are also areas of strong persistence of the German model. In addition, I show that the German model is far from uniform, with different types of companies and different regions demonstrating a variety of corporate governance arrangements as well as distinctive development trajectories.

Change in the German Model of Corporate Governance: Evidence from Blockholdings 1997-2001

We used the data on major holdings of voting rights in listed companies in 1997 and 2001 in order to research the dynamics of the German model of corporate governance. The change that took place in this short period of time is striking. The level of ownership concentration fell significantly, cross-holdings started to dissolve, and financial sector institutions, including the most powerful ones, lost their position as blockholders. The types of holders of voting rights in a company depend on its size, age, economic sector, and location. The concentration of voting rights is related primarily to the inclusion in DAX30 stock market index. We document a quick step of Germany towards the parameters of the Anglo-American corporate governance, but at the same time identify areas of strong persistence. There is a lot of diversity within the German model. Different types of companies and different regions have different corporate governance arrangements, with different development trajectories.

Ownership Structures and R&D Investments of U.S. and Japanese Firms: Agency and Stewardship Perspectives

This study analyzes the impact of ownership structure on R&D investments in the United States and Japan. It begins with the premise that U.S. and Japanese firms have distinct patterns of ownership that may result in disparities in R&D investments. Agency theory and stewardship theory are used to hypothesize about the relationship between ownership and R&D investments. Empirical evidence shows that the level of ownership concentration, and its impact, differ across countries. We argue that these differences result from a mixture of motives and incentives.

Board Remuneration, Company Performance, and Ownership Concentration: Evidence from Publicly Listed Malaysian Companies

I. Introduction This study investigates the relationship between total board remuneration and corporate performance in a sample of firms listed on the Kuala Lumpur Stock Exchange (KLSE). Our objective is to examine the relationship between performance and executive salaries within a principal-agent framework. Agency problems associated with the separation of ownership and control have been the subject of considerable empirical research. One strand of this research, predominantly using data from either the United States or United Kingdom, has focused on the compensation of top executives where agency problems might be manifest because of the separation of ownership and control (see Indjejikian 1999 and Murphy 1999). Recently academic research into how executives are rewarded has been fuelled by wider public interest in the United States and United Kingdom regarding the amounts paid to executives, which in turn has been driven by press reports of massive pay-outs. The issue of how executives are rewarded has also captured the imagination of the Malaysian public, particularly following the Asian financial crisis, with a recent Price Waterhouse Coopers (2001) investigation into what top Malaysian executives earn receiving extensive coverage in the Malaysian media. This paper makes two main contributions to the existing literature on executive compensation and corporate performance. First, there are several studies that investigate the relationship between executive compensation and corporate performance in Europe and the United States (see, for example, Murphy 1985; Main, Bruce, and Buck 1996; Brunello, Graziano, and Parigi 1997; Conyon 1997; Crespi and Gispert 1998). However, there has been little investigation of the relationship between corporate performance, performance criteria, and executive compensation in firms in Asian countries. This is an important gap in the literature, given that there are differences in the level of ownership concentration between Asian and Anglo-American economies. Berle and Means' (1932) classic description suggests that ownership in the United States is dispersed among small shareholders with control concentrated in the hands of the managers. This description has been questioned in more recent research. La Porta, Lopez-De-Silanes, and Shleifer (1999) found that ownership in countries other than the United States is more concentrated than depicted in Berle and Means (1932). There is some evidence to suggest that even in the United States ownership is now more concentrated than when Berle and Means (1932) wrote. Studies such as Morck, Shleifer, and Vishny (1988a) and Shleifer and Vishny (1986) have found at least a moderate degree of ownership concentration in the United States. Nevertheless, the concentration of ownership is greater in most Asian countries than in either the United Kingdom or the United States. In Malaysia's case, the main reasons for high levels of ownership concentration are the prevalence of family control and the significant amount of state control in listed companies (see, for example, Claessens, Djankov, and Lang 1999, OECD 1999). This has potentially important implications for the relationship between executive compensation and corporate performance. It suggests that the agency problems arising from the separation of ownership and control may not be as pronounced in Asian countries compared with the United Kingdom or the United States. If this is the case, it implies that the relationship between board remuneration and firm performance should be weaker than in the United Kingdom or the United States. The rationale behind this is that the level of ownership concentration is a proxy for the intensity of shareholder supervision. When ownership is diverse, the potential exists for sub-optimal monitoring because individual shareholders are unable to fully appropriate the gains from the monitoring function. Because monitoring has the features of a public good, an individual shareholder who carries out the monitoring function personally bears the full specification and enforcement costs, but in return appropriates just a fraction of the assumed total gain. …

Competition and ownership structure: Substitutes or complements? Evidence from the Warsaw Stock Exchange

In this paper we analyse the impact of product market competition and ownership structure on firm performance. Our results show that product market competition has a positive and significant impact on performance. Concerning the effect of ownership concentration, we find a U–shaped relationship with performance. Firms with relatively dispersed and relatively concentrated ownership have higher productivity growth than firms with an intermediate level of ownership concentration. This correlation between concentration of ownership and productivity growth is not explained by the type of the controlling shareholder. Finally, product market competition and good governance tend to reinforce each other rather than to be substitutes. Competition has no significant effect on performance for the firms with ‘poor’ governance; on the contrary, it has a significant positive effect in the case of firms with ‘good’ corporate governance.JEL classification: D24, G32, L1, P2.

Wealth Effects of Private Equity Placements: Evidence from Singapore

We examine institutional characteristics and the wealth effects of private equity placements in Singapore. Our findings show that private placements in Singapore generally result in a negative wealth effect and a reduction in ownership concentration. We find that at high levels of ownership concentration, the relation between abnormal returns and changes in ownership concentration is significantly negative. We also show that the market reacts less favorably to placements in which management ownership falls below 50%, but more favorably to issues to single investors. We do not find evidence suggesting that our results are due to an information effect.

Corporate Governance Development in the Greater China: A Taiwan Perspective

The Greater China region --- by which I mean Taiwan, China and Hong Kong (and excluding Macao for now) --- has been one of the fastest growing areas in the world. Interestingly, corporate governance has not been much discussed in this region until the recent years. It is therefore opportune to try to examine whether there is any corporate governance model. From a legal perspective, this is a fascinating and daunting task. I will only attempt to examine a few topics covered in this vast subject to see whether this discourse can be enriched. One should start briefly with the similarities and differences of these three economies. In recent years, each of the economies in this region has received different challenges. They are at different stages of economic development, and they have vastly different development strategies and political economy. However, ethnic Chinese business culture is one common thread among them. In the area of corporate governance, these three economies all face some level of ownership concentration. In Taiwan and Hong Kong, family-owned but listed companies dominate the stock exchange. In China, the recent corporatization of state-owned enterprises still leaves the state with significant blocks of ownership. Therefore, the owner-manager (entrepreneurs) in China is only an emerging (albeit rapidly emerging) phenomenon. There is much closer integration between Hong Kong and southern China than the case between Taiwan and China. However, after both sides accede to the World Trade Organization, we can anticipate even closer cross-strait economic links. The three economies have different legal systems. Hong Kong has a modern Common Law system, although its Company Ordinances are increasingly becoming outdated. Taiwan follows the Civil Law system, and all practitioners and even some government officials admit that the corporate law is also very archaic. China now is reverting to the Civil Law system with, of course, a strong emphasis on socialist market economy with Chinese characteristics. In addition to the roots of the legal system, bureaucracy and public law administration also differ widely in the three economies. Generally, Hong Kong has been rated as having a far better (and far better paid) civil service system than in Taiwan and China. These differences in corporate and administrative law have profound ramifications on the state of corporate governance of respective economies.

Competition and Corporate Governance: Substitutes or Complements? Evidence from the Warsaw Stock Exchange

In this paper we analyze the impact of product market competition and ownership structure on corporate performance. We focus on the firms listed on the Warsaw Stock Exchange, which are either privatised or newly created firms. First, we study the separate effects of competition and ownership concentration on firm level productivity growth. Next, we investigate their interaction: are they substitutes or complements? We take care of the crucial problem of potential endogeneity of explanatory variables by using GMM estimators proposed by Arellano and Bond (1991). We also control for several types of selection bias that could affect the productivity levels. Moreover, we control for industry fixed effects affecting the rate of growth of productivity. Our results show that product market competition has a positive and significant impact on performance. Concerning the effect of ownership concentration, we find a U-shaped relationship with performance. Firms with relatively dispersed ownership (no shareholder with more than 20 per cent of voting shares) and firms, in which one shareholder has more than 50 per cent of voting shares, have higher productivity growth than firms with an intermediate level of ownership concentration. This correlation between concentration of ownership and productivity growth is not explained by the type of the controlling shareholder. Finally, product market competition and governance tend to reinforce each other rather than to be substitutes. Competition has no significant effect on performance for the firms with poor governance; on the contrary, it has significant positive effect in the case of firms with good corporate governance.

Agency Conflicts in Public and Negotiated Transfers of Corporate Control

We analyze control transfers in firms with a dominant minority blockholder and otherwise dispersed owners, and show that the transaction mode is important. Negotiated block trades preserve a low level of ownership concentration, inducing more inefficient extraction of private benefits. In contrast, public acquisitions increase ownership concentration, resulting in fewer private benefits and higher firm value. Within our model, the incumbent and new controlling party prefer to trade the block because of the dispersed shareholders' free‐riding behavior. We also explore the regulatory implications of this agency problem and its impact on the terms of block trades.

Demystifying the illusion of the positive effects of ownership concentration on corporate performance

Evidence supporting the relationship between ownership structure and corporate performance has been rather contradictory. In this research, we investigate the effects of ownership structure on business performance on a sample of 600 listed Canadian firms. We used a three-phase analysis of variance in which each phase used a different definition of ownership concentration: i) the overall concentration of the five largest shareholders (CONC); ii) the holdings of the largest shareholder (BLC1); and iii) inside shareholders as either managers or directors (BLCI). For each phase, we used cluster analysis and three other concentration cutoff levels (an even-split into thirds, extreme quartiles, and the Morck, Shleifer and Vishny (1988) cutoff) to verify if there is an optimal level of concentration cutoff that may impact the performance. Our results indicate a high level of ownership concentration in Canadian corporations. The Berle-Means widely held corporation is far from universal. Besides, while state control of traded firms is infrequent, family control is common. However, our findings indicate only a weak association between performance measures and ownership concentration levels, except for the return on investment, which shows some improvement with a high level of ownership. Our results confirm those of Demsetz and Lehn (1985). Overall, no evidence is found to support the efficient monitoring hypothesis, since performance cannot be improved by blockholders who seem not only to be entrenched but may benefit from perquisites and on-the-job consumption. This might indicate that large shareholders expropriate minority absentee owners.

Travel Distribution Technologies and Sustainable Tourism Development: The Case of South Pacific Microstates

The island microstates of the South Pacific face the major challenge of fine tuning tourism products and marketing strategies to meet the changing needs of the traveller, while at the same time creating a more sustainable industry. This paper examines how new travel distribution technologies can influence attempts to meet this challenge.The discussion begins with a review of the literature on the growth of 'new' tourism in small island states- focusing on the key role ascribed to evolving distribution technologies, especially computer reservations systems (CRS). The growth of CRS is then examined, with an emphasis on the rising levels of ownership concentration that characterise this segment of the tourism industry. Data on the role that CRS technologies can play in influencing tourism flows within the South Pacific are then presented. Access to CRS is shown to be extremely limited for many smaller destinations and locally owned companies, placing them at a competitive disadvantage vis-a-vis their larger counterparts. The broader implications of the findings for sustainable development processes are explored and a number of recommendations are made as to how Pacific microstates may improve their ability to take advantage of emerging travel distribution technologies.

Does Ownership Matter? A Study Of German And UK IPOS

This paper investigates whether ownership concentration and different types of large shareholders can account for differences in corporate profitability. Both univariate tests and multivariate tests are applied on a sample of German and UK initial public offerings (IPOs). It is particularly interesting to study German and UK IPOs for two reasons. First, comparing German and UK firms is beneficial in terms of a high cross-sectional variation of ownership, as both countries have financial markets characterized by different levels of ownership concentration. Most previous studies have suffered from a low cross- sectional variation. Second, analyzing IPOs over several years adds an interesting time-series variation to the study. The univariate study tests whether entrenchment by the initial large shareholder and a higher exposure to the disciplining role of the market for corporate control have any effects on a firm's financial performance. The multivariate study tests a dynamic model which relates current performance to past performance and ownership characteristics. We do not find any link between profitability and ownership and conclude that ownership is chosen in ways to maximize firm value.

Ownership Concentration and Control in Large US Corporations in the 1930s: An Analysis of the TNEC Sample

This paper employs a simple-game-theoretic perspective to analyse the relationship between shareholding concentration and the voting power of leading coalitions among the top 200 non-financial corporations. The power index used to define controlling coalitions is the degree of control of Cubbin and Leech. The results show that, on the basis of observed levels of ownership concentration, control by small coalitions of shareholders was feasible for the majority of companies. There is no evidence on this basis to support a general assumption of a pervasive separation between ownership and control.