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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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No
difference in performance. |
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Malatesta and Walkling [1988], Journal of Financial Economics |
113
1982-86. |
%
insider ownership by managers and directors. |
Two-days'
cumulative abnormal return, CAR, by the firm over the interval (AD-1, AD0)
where AD is the announcement date. |
None. |
Event-study.
Standard t-test for differences in means between two industry-paired samples. |
The
adoption of poison pill securities significantly reduces shareholder wealth.
Abandoning them significantly increases shareholder wealth. Firms with poison
pills have significantly less managerial ownership and are more subject to
takeover attempts than firms in the same industries without poison pills. |
The
entrenchment argument. Note that managers can entrench themselves using poison
pills instead of stock ownership. |
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McConnell and Servaes [1990], Journal of Financial Economics |
1.173
firms in 1976 and 1.093 firms in 1986. US firms listed on NYSE or AMEX. 1976
& 1986. |
1)
Insider stock ownership by managers and directors. 2) Institutional ownership.
3) Blockholders as combined ownership by non-insiders who have more than 5%
ownership. 4) Largest single blockholder. 5) Dummy for presence of blockholders.
6) Insiders plus all blockholders. 7) Insider ownership in the ranges:
[0-5%], [5-25%], and [25-100%]. 8) Insiders plus all blockholders in the
ranges: [0-5%], [5-25%], and [25-100%]. Data from Value Line. |
1)
Tobin’s Q by market value of stock, preferred stock and debt to replacement
value of assets. 2) Return on assets by earnings before depreciation, interest
and taxes divided by replacement value of assets. |
1)
For a limited set of tests industry has been accounted for by subtracting average
industry differences in Tobin’s Q from each observation of Tobin’s Q. 2) Size
by replacement cost of assets. 3) R&D costs to size. 4) Advertising to
size. 5) Long-term debt to size. |
OLS
regression. Test for roof-shaped relation by including the squared insider ownership
(or insiders plus all blockholders) and by using piecewise linear regression.
|
Both
measures of profitability is significantly increasing with ownership by
managers and directors, and this relation is significantly roof-shaped with a
performance peek for 69% ownership in 1976 and 41% in 1986. Defining ownership
as insiders plus all blockholders produce similar results. Performance
increases significantly with institutional ownership, but no measure of blockholder
ownership seems to have any effect. All control variables are significant. Using
piecewise linear regression profitability is significantly increasing for
insider [or insider plus all blockholders] ownership in the [0-5%] range. |
Stulz’s
[1988] combined takeover premium and entrenchment argument is used with
regard to insider ownership, and Pound’s [1988] efficient-monitoring argument
is used with regard to institutional ownership and blockholder ownership. |
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McConnell and Servaes [1995], Journal of Financial Economics |
990
firms in 1976, 876 firms in 1986, and 780 firms in 1988. US firms listed on
NYSE or AMEX. 1976
& 1986 & 1988. |
1)
Insider stock ownership by managers and directors. 2) Institutional ownership.
3) Blockholders as combined ownership by non-insiders who have more than 5%
ownership. 1976
and 1986 sample from Value Line Investment Survey. 1988 sample from Disclosure |
Tobin’s
Q by market value of stock, preferred stock and debt to replacement value of
assets. |
As
Morck, Shleifer and Vishny [1988] but not including industry. 1)
Size by replacement cost of assets or book value of assets or market value of
firm. 2) R&D costs to size. 3) Advertising to size. 4) Leverage by
long-term debt to size. 5) Growth opportunities by price / earnings or sales
growth forecasts or five-year historical growth rate or Tobin’s Q. |
OLS
regression. Test for roof-shaped relation by including the squared insider ownership.
The sample is classified in order to control for growth opportunities. |
Using
the new 1988 sample reproduces the results from McConnell and Servaes [1990].
Only difference is that Tobin’s Q now is significantly increasing with
blockholder ownership. For all sample periods the relation between Tobin’s Q
and all ownership variables is insignificant for high-growth firms and
significantly positive and roof-shaped for low-growth firms. Significant
controls: Q increases with leverage in low-growth firms and decreases for
high-growth firms. |
Stulz’s
[1988] combined takeover premium and entrenchment argument is used with
regard to insider ownership, and Pound’s [1988] efficient-monitoring argument
is used with regard to institutional ownership and blockholder ownership. |
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48
large |
MC
£4%. EC
³4% and no management representation. |
Return
on stocks calculated as average price increases from 1963 to 72 assuming dividends
are reinvested. |
Industry
type by major product. |
OLS
regression. |
|
The
incentive alignment argument both with regard to |
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153
large and small industrial 1979-80. |
1)
% of shares and stock options held by CEOs and their immediate families. 2) %
of shares held by all officers and directors. 3) % of shares held by outside
directors. 4) % of shares held by all outside 5% blockholders. 5) Various
definitions of outside blockholders |
1)
Tobin’s Q by market value of all firm securities to replacement costs of all
tangible assets. 2) Return on assets. |
1)
% of CEO compensation that is equity-based. 2) % of outside directors. 3)
Size by log of sales. 4) R&D to sales. 5) Inventory, gross plant and equipment
to total assets. 6) Leverage by long-term debt to total assets. 7) Standard
deviation of the % change in operating income. |
OLS
regression. Test for heteroskedasticity, but finds none. |
Both performance measures increase significantly with CEO ownership. No significant effect of ownership by all officers and directors or ownership by outside directors. Blockholder ownership is not significant in any sence. Significant
controls: 1) % of CEO compensation that is equity-based. 2) R&D to sales.
3) Size. |
The
incentive alignment argument. |
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Find
that the likelihood of a successful acquisition is unrelated to managerial
shareholdings. It covers that lower managerial shareholding increase the
likelihood of receiving a takeover offer but decreases the likelihood that it
will succeed. |
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Mikkelson, and Partch [1997], Journal of Financial Economics |
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Insider
ownership by officers and directors. |
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Find
no significant decline in operating performance of firms that go public.
Insider ownership falls from 68% to 18% after 10 years of the IPO. |
The
incentive alignment argument. |
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Presence
of large-block equity holder or not. |
Abnormal
returns |
|
Event
study |
Significant
and positive performance on announcement of outsider’s acquisition of a large
equity position, but only persistent if takeover or other corporate restructure
follows. |
The
incentive argument. |
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111
blockholder investment and targeted stock repurchases. 1978-83. |
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Cumulative
abnormal return, CAR, by the repurchasing firm over the intervals (A-1, A0)
and (R-1, R0) where A is the date of the 5% block acquisition and R is the
date of the targeted repurchase. |
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Look
at targeted repurchases from the time of block investment. At that initial
stage stock prices rises significantly whereas they fall significantly at the
time of repurchase. For the entire period it increased significantly. |
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72
firms of the 500 largest 1952-63. |
MC £5% single block of voting control. OC ³10% and evidence of active control, or, ³20%. |
Return
on equity. Observed 1952-63. |
1)
Industry type by major product. 2) Size of firm by sales. 3) Time. |
Variance
analysis and a balanced fixed model of three-way analysis of covariance with
one concomitant variable. |
OC
firms are significantly (strong) more profitable than MC firms. Time and
industry type are also significant. Size is not. |
The
incentive alignment argument. |
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Morck, Shleifer and Vishny [1988a], Journal of Financial Economics |
371
of the largest 1980. |
1)
Combined shareholding by all members of the board in the ranges: [0-5%],
[5-25%], and [25-100%]. 2)
Combined shareholding by top two officers. 3)
Dummy for presence of founder on board. Data
from Corporate Data Exchange |
1)
Tobin’s Q by market value of stock, preferred stock and debt to replacement
cost of plant and inventories. 2) Profit rate by net cash flow to replacement
cost of capital. |
1)
Size by replacement cost of assets. 2) R&D costs to size. 3) Advertising
to size. 4) Long-term debt to size. 5) Industry by three-digit SIC. |
OLS
regression. Use piecewise linear regression. |
Profitability
is significantly increasing for board ownership in the [0-5%] range and
significantly decreasing in the [5-25%] range and if the founder is present
on the board of old firms. Significant controls: R&D to size and debt to
size. Similar results for top two officers. |
The
incentive argument coupled with an entrenchment argument. |
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Morck, Shleifer, and Vishny [1988b], Paper in
a book. |
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Find
a positive relation between managerial shareholding and the probability of acquition. |
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Murali and Welch [1989], Journal of Business Finance and Accounting |
43
closely held and 83 widely held industry matched US firms. 1977-81. |
Closely
held firms- > 50% by small group or individual. Widely
held firms- All other firms. Data
from Value Line. |
1)
Adjusted stock market return. 2) Return on assets. 3) Return on equity. |
1)
Size by assets or equity. 2) Capital expenditures to sales. 3) Advertising expenditures
to sales. 4) R&D to sales. 5) Standard variation of return on assets and
equity. |
OLS
regression on performance. |
No
significant difference in performance between closely held and widely held
firms. Significant controls: Standard variation on return on assets and equity,
and R&D to sales. |
No
particular argument. |
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Nickell, Nicolitsas and Dryden [1997], European Economic Review |
580
1985-1994. |
Dummies
SC1, SC2, and SC3 equal to 1 if largest shareholder has 90% or 95% chance of
winning a majority vote. SC1
is a financial firm. SC2
is a person, a family, a group of linked individuals, a company pension fund
or charity. SC3
is a non-financial company. |
Productivity
growth as change in log of real sales. |
1)
Lagged productivity growth. 2) Change in log of employment. 3) Change in log
of capital stock. 4) Change in index of industry overtime hours. 5) Monopoly
power by change of market share, or industry concentration, or industry import
penetration or rent / value added. 6) Size by log of employment. 7) Financial pressure by interest payments
/ cash flow 8) Industry & time dummies. |
Regression
technique by Arellano and Bond 1991 for dynamic panel data models. Checks
for substitution effects between financial pressure, monopoly power and shareholder
control by including interaction terms. |
Productivity
increases significantly with SC1 and decreases significantly with SC3. Significant
substitution effect between financial pressure and monopoly power, and SC1
and monopoly power. Significant
controls: Employment. Index of industry overtime hours. Market share. Rent /
value added. |
The
efficient monitor argument, the free cash flow argument and a competition argument. |
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- Copyright 1997-2008, ViamInvest. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Legal notice. |
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