International corporate governance - Ownership structures

Table: International corporate governance - Tentative characterizations of legal and empirical state of large firm ownership structures in various countries as of 1980-1995:

Developing countries
Germany
Japan
Anglo-American countries
Denmark

Introduction: Some of the characterizations can be found in Shleifer and Vishny [1996, pages 49-55]. Precautionary statement: The first version of this table was primarily made out of memory and consequently it lacks adequate references and may contain errors about the actual legal and empirical state of the different institutions. As time passes more references will be added.

Tentative characterizations of legal and empirical state of large firm ownership structures in developing countries as of 1980-1995

A) Laws on foreign ownership.

Legal state: Foreign ownership is often prohibited. This picture is beginning to chance fast for most developing countries that open up their capital market for foreign investments.

Empirical state: Foreign ownership is rare in many developing countries.

B) Laws on ownership of non-financials by financial firms.

Legal state: Financial firms are not allowed to own non-financials.

Empirical state: Hardly any ownership by institutional investors.

C) Laws on state ownership.

Legal state: Many important industries are preserved for government ownership. This picture is beginning to chance fast for most developing countries that project large-scale privatizations.

Empirical state: Probably the most common form of ownership.

D) Laws on other kinds of ownership.

Legal state: Family ownership and public ownership is possible.

Empirical state: Concentrated family ownership dominates together with state ownership, but public equity markets are very small.

Tentative characterizations of legal and empirical state of large firm ownership structures in Germany as of 1980-1995

A) Laws on foreign ownership.

Legal state: The restrictions on foreign ownership of German firms are virtually non-existing today.

Empirical state: An increasing and very significant number of firms are owned holly or partly by foreign investors.

B) Laws on ownership of non-financials by financial firms.

Legal state: fewer barriers. Banks and institutional investors are able to own controlling stakes in non-financial firms.

Empirical state: A lot of equity is financed non-publicly by institutional investors who have some degree of long-term commitment to the firm. The degree of concentration is generally very high.

C) Laws on state ownership.

Legal state: Important areas in the economy are restricted for state ownership.

Empirical state: Railroads and most postal services are still state owned. So are medical services, education, elder care and many public utilities.

D) Laws on other kinds of ownership.

Legal state: Otherwise there are few restrictions.

Empirical state: Public equity markets are small. A lot of equity is financed non-publicly by families who have some degree of long-term commitment to the firm. The degree of owner concentration is generally very high.

Tentative characterizations of legal and empirical state of large firm ownership structures in Japan as of 1980-1995

A) Laws on foreign ownership.

Legal state: Until recently restrictions on foreign ownership.

Empirical state: Foreign ownership is rare.

B) Laws on ownership of non-financials by financial firms.

Legal state: Formally financial investors are not allowed to own non-financial firms. However, they are allowed to cooperate in order to gain control and this is often the case. In particular, several institutional investors form consortiums to control several firms and the monitor job is delegated to one investor in each consortium who also is informally responsible for possible loses of other investors money due to negligent monitoring.

Empirical state: Most equity, public or not, is hold by financial investors.

C) Laws on state ownership.

Legal state: Important areas in the economy are restricted for state ownership.

Empirical state: Railroads and most postal services are still state owned. So are medical services, education and elder care.

D) Laws on other kinds of ownership.

Legal state: Few barriers.

Empirical state: Public equity markets are large, and the majority is hold by shareholders that have some degree of long-term commitment to the firm. This include institutional investors, but also major customers and suppliers.

Tentative characterizations of legal and empirical state of large firm ownership structures in Anglo-American countries as of 1980-1995

A) Laws on foreign ownership.

Legal state: The restrictions on foreign ownership of the US firms are virtually non-existing today.

Empirical state: An increasing and very significant number of firms are owned holly or partly by foreign investors.

B) Laws on ownership of non-financials by financial firms.

Legal state: Many barriers. E.g. banks and institutional investors are not allowed to own non-financial firms, see Roe [1990, page 10]. However, recently this has been allowed in cases of temporary reconstruction of a firm’s finances.

Empirical state: In aggregate, the equity of most public firms primarily comes from financial investors.

C) Laws on state ownership.

Legal state: A very limited part of the economy is preserved for state ownership.

Empirical state: Most areas of the economy are privately run, although education receives huge state subsidies.

D) Laws on other kinds of ownership.

Legal state: Very few barriers.

Empirical state: Family ownership is not common among large enterprises. Public equity markets are large and ownership very dispersed so that a majority of equity is hold by investors who are not closely involved with the firm.

Tentative characterizations of legal and empirical state of large firm ownership structures in Denmark as of 1980-1995

A) Laws on foreign ownership.

Legal state: The restrictions on foreign ownership of Danish firms are virtually non-existing today.

Empirical state: An increasing and very significant number of firms are owned holly or partly by foreign investors.

B) Laws on ownership of non-financials by financial firms.

Legal state: Banks and institutional investors are not able to own controlling stakes in non-financial firms.

Empirical state: Institutional investors and banks are now financing more than 30% of both the public and the non-public equity market for large corporations, Beretning fra Finanstilsynet various volumes.

C) Laws on state ownership.

Legal state: Important areas in the economy are restricted for state ownership.

Empirical state: Railroads and most postal services are still state owned. So are medical services, education and elder care.

D) Laws on other kinds of ownership.

Legal state: Otherwise there are few restrictions.

Empirical state: The degree of concentration is generally very high and public equity markets are becoming more important than non-public equity markets. Family ownership in terms of foundation ownership is still very important.