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Corporate ownership structure and performance in Europe

Kirchmaier, Thomas and Grant, Jeremy (2005) Corporate ownership structure and performance in Europe. European Management Review, 2 (3). pp. 231-245. ISSN 1740-4762

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Abstract

In this paper, we show that ownership structures vary considerably across the largest European economies, and that ownership has a significant impact on firm performance. We demonstrate that ownership structures in Europe are not necessarily consistent with value maximisation principles. Ultimately, the results show that dominant shareholders have a negative impact on long-term share price performance. These findings are in contradiction to similar research based on US samples. Our results remain robust after controlling for industry and country effects, size and the type of owner. We base our analysis on a new and unique data set of uniform and reliable ownership data of the largest 100 public firms in the five major European economies. We quantify the differences in ownership by comparing three distinct ownership structures of firms, and relating them to performance. In addition to standard performance measures, we employ, for the first time, a Hodrick–Prescott filter. This methodology is widely used in macroeconomics to isolate the trend growth components from cyclical fluctuations. Here it is deployed to estimate the share price trend of each firm.

Item Type: Article
Official URL: http://www.palgrave-journals.com/emr/index.html
Additional Information: © 2005 Palgrave Macmillan
Library of Congress subject classification: H Social Sciences > HF Commerce
Sets: Research centres and groups > Financial Markets Group (FMG)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 16 Nov 2009 16:22
URL: http://eprints.lse.ac.uk/25773/

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