The Effect of Ownership structures on Firm Value and Performance in Continental Western Europe.
Author:
Maurits Ronald Andreas Joachim Schansman
Supervisor: L. Dam
Second Supervisor: dr. H. Gonenc
October 2011
University of Groningen Faculty of Economics and Business Master of Science and Business Administration
Specialization Finance
The Effect of Ownership structures on Firm Value and Performance in Continental Western Europe.
Maurits Ronald Andreas Joachim Schansman
1Supervisor: L. Dam
Second Supervisor: dr. H. Gonenc
Abstract
This study examines the ultimate ownership and control of 653 listed non-financial corporations in 10 Western countries and investigates the relationship between different ownership types and corporate performance during the financial crisis period 2008-2010. The data are sorted into five ownership types: Family, State, Financial, Widely held and Other and focus on family owned firms in particular.
The study indicates that active family control is associated with higher firm performance in terms of Tobin’s Q and Return on assets compared to non-family firms. Family controlled corporations most recur to control enhancing instruments, which in theory are associated with lower valuation and firm performance. The results show that a wedge between voting and cash-flow rights in relationship with family control positively influences corporate performance. Additionally, this study reveals that an active role of family members correlates with higher firm performance. Moreover, active family control gives higher firm value compared to a passive role outside the board.
Key words: Ownership structure, Firm performance, Agency theory, Corporate Governance JEL Classification: G3,G32
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