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Table: Empirical
studies on ownership structure and performance[1]
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z |
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Author(s) &Journal |
Sample
& Period[2] |
Ownership
|
Performance
variable(s) |
Other
variable(s): Controls & dependents[5] |
Statistical
methods |
Main
results |
Preferred
explanation |
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Chen, Hexter and Hu [1993], Managerial and Decisions Economics |
Fortune 500. 1976 & 1980 & 1984. |
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Tobin’s Q by |
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Find that Tobin's Q increases for management ownership in the range
[0-7%] and decreases in the range [7-12%]. For the 1976 sample it continues
to fall in the [12-100%] range, but increases for the 1980 and 1984 sample. |
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326 of 500 large 1991. |
1) Inside ownership as share ownership by officers and directors of the board. 2) Insider ownership in the ranges: [0%, 7%], [7%, 38%], and [28%, 100%]. Data from Value Line Investment Survey. |
Tobin’s Q. |
1) Corporate investment by 1.1) capital expenditure and 1.2) R&D
expenditure. 2) Size by log of replacement cost of assets or market value of
equity. 3) Financial leverage by market value of long term debt to replacement
cost of assets. 4) Industry (two-digit). 5) Liquidity by cash flow to replacement
cost of capital. 6) Volatility by standard deviation of profit rates 1986-91. |
OLS regression. Test for non-monotonic relation by piecewise linear regression
and fix the breakpoints by a grid search technique that maximizes significance.
Two (and tree) stage least squares regression. Estimate three
equations with ownership, performance, and investment as the dependent variables. |
In two separate OLS regressions Tobin’s Q and capital expenditure is
significantly increasing for inside ownership in the [0,7%] range and significantly
decreasing in the [7%, 38%] range. The
2SLS regression reveals that inside ownership increases significantly with
Tobin’s Q, and Tobin’s Q increases insignificantly with inside ownership.
Performance increases significantly by capital expenditure and also so the
other way around. Significant controls: Market value of equity, and liquidity.
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Argues that inside ownership determines investment, which in turn
determines performance, which in turn determines inside ownership. Cho uses the insider-reward argument to explain why performance determines
ownership. |
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Finds that the likelihood of a successful tender offer increases with
managerial ownership and that successful tender offers are associated with
significant abnormal returns. |
The takeover premium argument by Stulz [1988]. |
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43 large industrial 1969-74. |
1) Dummy for external control that is control by non-directors and
managers. 2) Degree of control of largest shareholder. |
Average profit rate. |
1) Size by net assets. 2) Diversification. 3) Beta risk. 4) Profit
salary trade-off for internally controlled firms. 5) Asset growth rate. 6)
Internal assets growth rate. 7) Industry sub-group average profit rate. |
OLS and 2SLS regressions. Dependent variables are growth and profits.
Checks for simultaneous effect of internal vs external control and degree of
control by including interaction terms. |
It is more a study on the relation between growth and profits than on
ownership and performance. Positive relation between asset growth and profits
but none for ownership and profits. Significant controls: 1) Industry
sub-group average profit. 2) Beta risk. |
The natural selection argument. |
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Curcio [1994], Discussion Paper, Centre for
Economic Performance, |
389 quoted, 1972-86. |
1) Combined equity or voting ownership by members of the board in the
ranges: [0-5%], [5-25%], and [25-100%]. 2) Equity or voting ownership by the board of directors. 3) Disparity
between board stock and voting ownership. Observed 1981. |
1) Tobin’s Q. 2) Total factor productivity growth or real value added by employee
remuneration plus interest payments, depreciation, amortization and profits. |
No controls are used in regressions of different measures of ownership
on Tobin’s Q. Regressions on factor productivity growth include the following
controls: 1) Log of average hours worked. 2) Log of capital stock. 3) Log of
average hours worked. 4) Time. 5) Industry. 6) Market share and its growth.
7) Market share by 5 largest firms. 8) Import penetration. 9) Leverage and
its growth. 10) Small firm dummy. 11) Union density. |
OLS regression and a heteroscedasticity consistent technique. Test
for roof-shaped relation by including the squared insider ownership and by
using piecewise linear regression. |
Profitability is significantly decreasing with board ownership in the
[25-100%] range with regard to Tobin’s Q. Profitability is significantly decreasing with the disparity between
equity and voting ownership both with regard to Tobin’s Q and productivity
growth. Significant controls: Average hours worked, import penetration and
leverage. |
The incentive alignment argument with regard to managerial stock ownership,
and a combined entrenchment and incentive argument with regard to voting and
share dispersion. |
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# stock repurchase and standstill agreements. |
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Find evidence in support of the entrenchment argument. |
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# adoptions of anti-takeover amendments. |
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Find week evidence in support of entrenchment. |
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56 large 1980. |
Insider ownership by directors and officers. Insider trading volume. |
Insider trading involvement as insider trading volume to insider
ownership. |
None. |
Descriptive. |
Insider trading involvement is 7 times higher for firms with high
insider ownership. |
The insider-investment argument. |
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511 large 1976-80. |
1) Log of an Herfindal index. 2) Log of combined holding by 5 largest
shareholders. 3) Log of holding by 20 largest shareholders. 4) Holdings by 5
largest families and individuals. 5) Holdings by 5 largest institutional investors. Data from Corporate Data Exchange and other sources. |
1) Return on equity. 2) Standard error of market model regressing
firm return on market return. |
1) Firm size by market value of equity 2) Standard deviation of stock
return. 3) Standard deviation of accounting return on equity. 4) Industry
dummies for utilities, financials and media. 5) Capital expenditure / total
sales. 6) Advertising / total sales. 7) Research & development / total
sales. |
OLS regression. |
Performance by accounting return is insignificantly decreasing with
ownership by 5 or 20 largest shareholders or the Herfindal index. Ownership
by 5 or 20 largest shareholders (or Herfindal or ownership by family and individuals
or institutional investors) increases significantly by standard error of
market return. Significant controls: Market value and all measures of
industry and standard deviation. |
The natural selection argument. |
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72 1985. |
1) Majority ownership- >50% insider ownership by managers and
directors. 2) Institutional ownership. 3) Dummy for outside blockholder ownership.
4) Dummy for family or founder involvement in management or board of directors. |
1) Return on equity. 2) Return on assets. 3) Operating income to assets.
4) Tobin's Q. 5) Market to book ratio. |
1) Fraction of outside board members. 2) Board size 3) Dividend
yields. 4) Debt asset ratio. 5) Number of public securities offerings. 6)
Size by market value of equity. 7) Variance of stock returns. 8) R&D to
sales. 9) Dummy for dual class shares. |
Standard t-tests are applied to test for differences between the main
sample and an industry paired control sample. |
No difference in performance between majority controlled firms and
other firms. The likelihood of majority control increases significantly with
family or founder involvement Indeed, 80% of majority controlled firms have
substantial family or founder involvement. Majority controlled firms have
significantly: 1) less outside directors. 2) less outside blockholdings. 3)
less institutional shareholdings. 4) pay less dividends. 5) Dual class
shares. Other controls are insignificant. |
The entrenchment argument and the 'natural selection, argument. |
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Find evidence that active monitoring by outside blockholders helps to increases shareholder value in the two years after an unsuccessful contest. |
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- Copyright 1997-2010, ViamInvest. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Legal notice. |
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