Ownership concentration & firm performance: Evidence from an emerging market

Irena Grosfeld

No wp834, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: The initial view of the advantages of ownership concentration in joint stock companies was determined by the concern about the opportunistic managerial behavior. The growing importance of knowledge and human capital in the operation of firms shifts the focus of concern: excessive ownership concentration may stifle managerial initiative. This may be particularly true, and the results obtained in this paper support this hypothesis, in firms with high share of knowledge related activities. I explore the determinants of ownership concentration and the relationship between ownership structure and firm value in the context of a transition economy, i.e. an economy undergoing important changes in its legal and regulatory framework, in macroeconomic policy and most of all, in its property rights allocation. I focus on all non-financial companies traded on the Warsaw Stock Exchange since its inception in 1991 and up to 2003. We can observe that ownership of companies becomes more dispersed with the number of years of listing. The results reported in this paper suggest that firm adjust their ownership structure to firm specific characteristics and that firms belonging to the sector of high technology tend to have lower ownership concentration. However, the positive impact of ownership concentration on firm value detected in OLS regressions becomes even stronger when we control for the endogeneity of ownership.

Keywords: Ownership structure; corporate governance; firm behaviour; uncertainty; knowledge economy (search for similar items in EconPapers)
JEL-codes: D21 G32 P2 P34 (search for similar items in EconPapers)
Pages: pages
Date: 2006-06-01
New Economics Papers: this item is included in nep-cse and nep-knm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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