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Ownership Structure and Corporate Performance

A Panel Data Analysis for the German Market

by Katinka Wölfer (Author)
Thesis XXIV, 321 Pages

Summary

The book sheds new light on the relation between equity ownership and corporate performance. Empirical studies presented in this book are based on a large panel data set and model the impact of concentrated ownership on performance, with nonlinear effect shapes being estimated through cubic splines. The final model incorporates the identity of owners into the investigation and illustrates the differing performance effects of various large shareholders. This approach adds to the understanding of ownership effects as previous research was mainly concerned with the role of ownership concentration and neglected the identity of blockholders as an equally important dimension of ownership. The new perspective will give fresh impetus to researchers, corporate decision makers and public policy.

Table Of Content

  • Cover
  • Title
  • Copyright
  • About the Author
  • About the Book
  • This eBook can be cited
  • Table of Contents
  • List of Figures
  • List of Tables
  • List of Abbreviations
  • List of Symbols
  • 1 Introduction
  • 1.1 Motivation and Objectives
  • 1.2 Outline
  • 2 Characteristics of Ownership Structure and Performance
  • 2.1 Introduction
  • 2.2 Concentration of Ownership
  • 2.2.1 Preliminary Considerations
  • 2.2.2 Ownership Concentration Measures
  • 2.2.2.1 Categorical Concentration Measures
  • 2.2.2.2 Continuous Concentration Measures
  • 2.3 Identity of Owners
  • 2.3.1 Preliminary Considerations
  • 2.3.2 Owner Typology
  • 2.3.2.1 Individual Investors
  • 2.3.2.2 Insiders
  • 2.3.2.3 Corporations
  • 2.3.2.4 Financial Investors
  • 2.3.2.5 Commercial Banks
  • 2.3.2.6 Government
  • 2.4 Corporate Performance
  • 2.4.1 Performance Dimensions
  • 2.4.2 Performance Measures
  • 2.4.2.1 Capital Market Performance
  • 2.4.2.2 Accounting Performance
  • 3 Theoretical Framework
  • 3.1 Introduction
  • 3.2 Theory Base
  • 3.2.1 Early Approaches and Roots of Agency Theory
  • 3.2.2 Agency Theory
  • 3.2.2.1 Origin of Agency Conflicts
  • 3.2.2.2 The Shareholder-Management Conflict
  • 3.2.2.3 Consequences From Shareholder-Management Conflicts
  • 3.2.2.4 Agency Control Mechanisms
  • 3.2.3 Summary
  • 3.3 The Concept of Ownership Concentration and Performance
  • 3.3.1 Effects of Ownership Concentration on Performance
  • 3.3.2 Reverse Effects of Performance on Ownership Concentration
  • 3.3.3 Summary and Hypotheses Development
  • 3.4 The Concept of Owner Identity and Performance
  • 3.4.1 Individual Investor Ownership
  • 3.4.1.1 Effects of Individual Investor Ownership on Performance
  • 3.4.1.2 Reverse Effects on Individual Investor Ownership
  • 3.4.1.3 Summary and Hypothesis Development
  • 3.4.2 Insider Ownership
  • 3.4.2.1 Effects of Insider Ownership on Performance
  • 3.4.2.2 Reverse Effects on Insider Ownership
  • 3.4.2.3 Summary and Hypothesis Development
  • 3.4.3 Intercorporate Ownership
  • 3.4.3.1 Effects of Intercorporate Ownership on Performance
  • 3.4.3.2 Reverse Effects on Intercorporate Ownership
  • 3.4.3.3 Summary and Hypothesis Development
  • 3.4.4 Financial Investor Ownership
  • 3.4.4.1 Effects of Financial Investor Ownership on Performance
  • 3.4.4.2 Reverse Effects on Financial Investor Ownership
  • 3.4.4.3 Summary and Hypothesis Development
  • 3.4.5 Bank Ownership
  • 3.4.5.1 Effects of Bank Ownership on Performance
  • 3.4.5.2 Reverse Effects on Performance
  • 3.4.5.3 Summary and Hypothesis Development
  • 3.4.6 Government Ownership
  • 3.4.6.1 Effects of Government Ownership on Performance
  • 3.4.6.2 Reverse Effects on Government Ownership
  • 3.4.6.3 Summary and Hypothesis Development
  • 4 Related Literature
  • 4.1 Introduction
  • 4.2 Moderating Factors
  • 4.2.1 Corporate Governance System
  • 4.2.2 Variable Measurement and Data Quality
  • 4.2.3 Methodology
  • 4.3 Review of Existing Studies
  • 4.3.1 Previous Research on Ownership Concentration and Performance
  • 4.3.1.1 Studies Modeling a One-Way Causation
  • 4.3.1.2 Studies Addressing Endogeneity of Ownership
  • 4.3.1.3 Multicountry Studies
  • 4.3.1.4 Summary
  • 4.3.2 Previous Research on Owner Identity
  • 4.3.2.1 Individual Investor Ownership and Performance
  • 4.3.2.2 Insider Ownership and Performance
  • 4.3.2.3 Intercorporate Ownership and Performance
  • 4.3.2.4 Financial Investor Ownership and Performance
  • 4.3.2.5 Bank Ownership and Performance
  • 4.3.2.6 Government Ownership and Performance
  • 4.3.2.7 Summary
  • 5 Research Design
  • 5.1 Introduction
  • 5.2 Data
  • 5.2.1 Sample Selection and Data Sources
  • 5.2.2 Variables Used
  • 5.2.2.1 Ownership Variables
  • 5.2.2.2 Performance Variables
  • 5.2.2.3 Control Variables
  • 5.2.2.4 Summary
  • 5.2.3 Descriptive Statistics
  • 5.3 Model
  • 5.3.1 Model Structure
  • 5.3.2 Modeling Aspects in the Ownership-Performance Relation
  • 5.3.2.1 Endogeneity of Ownership Structure
  • 5.3.2.2 Linearity of Ownership Effects
  • 5.3.2.3 Timing of Effects
  • 5.4 Econometric Approach
  • 5.4.1 Advantages and Limitations of Panel Data Sets
  • 5.4.2 Fundamental Panel Methods
  • 5.4.2.1 Pooled OLS Estimation
  • 5.4.2.2 Fixed- and Random-Effects Estimation
  • 5.4.2.3 Choice of the Appropriate Estimation Method
  • 5.4.3 Advanced Panel Methods
  • 5.4.3.1 Pooled 2SLS Estimation
  • 5.4.3.2 Within-2SLS Estimation
  • 5.4.4 Summary
  • 6 Empirical Analyses
  • 6.1 Ownership Concentration Effects
  • 6.1.1 Base Case
  • 6.1.1.1 Linear Within-Regression Results
  • 6.1.1.2 Summary
  • 6.1.2 Variations of the Base Case
  • 6.1.2.1 Instrumental Variable Regression Results
  • 6.1.2.2 Nonlinear and Piecewise-Linear Regression Results
  • 6.1.2.3 Restricted Cubic Spline Regression Results
  • 6.1.2.4 Summary
  • 6.2 Owner Identity Effects
  • 6.2.1 Identity of General Shareholder Base
  • 6.2.2 Summary
  • 6.3 Concentration and Identity Interaction Effects
  • 6.3.1 Identity of the Largest Owner
  • 6.3.2 Identity and Stake Size of the Largest Owner
  • 6.3.3 Summary
  • 6.4 Summary and Discussion of Results
  • 7 Conclusion
  • Appendices
  • A.1 Previous Research on Ownership and Performance
  • A.2 Pooled OLS Regression Results
  • A.3 Random-Effects Regression Results
  • A.4 Pooled 2SLS Regression Results
  • References

List of Figures

Figure 3.1:   Combined Convergence-of-Interest and Entrenchment Effect

Figure 3.2:   Combined Takeover Premium and Entrenchment Effect

Figure5.1:    Sample Distribution by Annual Revenues

Figure5.2:    Aggregated Size of Shareholdings of the g-th Largest Owner(s)

Figure5.3:    Average Shareholder Structure

Figure5.4:    Effect Shapes of the (Insider-) Ownership-Performance Relation in Selected Empirical Studies

Figure6.1:    Linear Within-Regression Result for Ownership Concentration Model 1.1 – Graphic Presentation of Results

Figure6.2:    Nonlinear Within-Regression Result for Ownership Concentration Model 6.3 – Graphic Presentation of Results

Figure6.3:    Nonlinear Within-Regression Result for Ownership Concentration Models 7.1 and 7.3 – Graphic Presentation of Results

Figure6.4:    Within-Regression Results for Ownership Concentration Models, Using Restricted Cubic Splines – Graphic Presentation of Results

Figure6.5:    Empirically Identified Relation Between Ownership Concentration and Performance

Figure6.6:    Empirically Identified Relations Between Owner Identity and Performance (Model 11.3)

Figure6.7:    Ideal Owner Types by Size of Dominant Shareholding

Figure6.8:    Link Between Owner Identity and Ownership Concentration Effects ← XIII | XIV → ← XIV | XV →

List of Tables

Table 2.1:      Common Ownership Concentration Measures

Table 2.2:      Common Owner Identity Measures

Table 2.3:      Common Measures of Performance

Table 3.1:      Agency Conflicts in the Shareholder-Management Relation

Table 3.2:      Informational Asymmetries in Agency Relations

Table 3.3:      Agency Control Mechanisms in Existing Contracts

Table 3.4:      Hypothesized Effects of Ownership Concentration and Performance

Table 3.5:      Hypothesized Effects of Individual Investor Ownership and Performance

Table 3.6:      Hypothesized Effects of Insider Ownership and Performance

Table 3.7:      Hypothesized Effects of Intercorporate Ownership and Performance

Table 3.8:      Hypothesized Effects of Financial Investor Ownership and Performance

Table 3.9:      Hypothesized Effects of Bank Ownership and Performance

Table 3.10:     Hypothesized Effects of Government Ownership and Performance

Table 4.1:      U.S. and German Corporate Governance Structures in Comparison

Table 5.1:      Sample Selection Process

Table 5.2:      Structure of the Sample

Table 5.3:      Pattern of the Sample

Table 5.4:      Sample Distribution by SIC Code

Table 5.5:      Definition of Variables Used

Table 5.6:      Correlation Matrix of Variables

Table 5.7:      Descriptive Statistics of Variables

Table 5.8:      Difference-In-Means Tests: Ownership Concentration

Table 5.9:      Differences-In-Means Tests: Change in Ownership Concentration Over Time

Table 5.10:     Frequency Distribution Across Owner Types to be Among the Company's Five Largest Owners

Table 5.11:     Relevance of Owner Types According to Size of Shareholdings

Table 5.12:     Models and Appropriate Estimators

Table 5.13:     Correlation Matrix of External Candidates for Instruments

Table 5.14:     Comparison of Panel Methods

Table 6.1:      Within-Regression Results for Ownership Concentration Models ← XV | XVI →

Table 6.2:      Results from Model Specification Tests (OLS vs. FE vs. RE) – Ownership Concentration

Table 6.3:      Within-2SLS Regression Results for Ownership Concentration Models

Table 6.4:      Test of Overidentifying Restrictions

Table 6.5:      Weak Instruments Diagnostics

Table 6.6:      Correlation Matrix of Internal Candidates for Instruments

Table 6.7:      Endogeneity Test

Table 6.8:      Within-Regression Results for Ownership Concentration Models, Quadratic and Cubic Relations Assumed

Table 6.9:      Within-Regression Results for Ownership Concentration Models, Piecewise-Linear Relations Assumed

Table 6.10:     AIC Values for Various Restricted Cubic Spline Models for Ownership Concentration Models

Table 6.11:     Within-Regression Results for Ownership Concentration Models, Using Restricted Cubic Splines

Table 6.12:     Within-Regression Results for Owner Identity Models

Table 6.13:     Results from Model Specification Tests (OLS vs. FE vs. RE) – Owner Identity

Table 6.14:     Within-Regression Results for Concentration and Identity Interaction Models, Using Dummies for the Identity of the Largest Owner

Table 6.15:     Within-Regression Results for Concentration and Identity Interaction Models, Using Interaction Terms

Table 6.16:     Hypothesized Effects of Ownership Concentration and Performance and Empirical Evidence

Table 6.17:     Hypothesized Effects of Owner Identity on Performance and Empirical Evidence

Table A.1.1:   Selected Academic Studies on Ownership Concentration and/or Owner Identity and Performance

Table A.2.1:   OLS Regression Results for Ownership Concentration Models, Excluding Time Dummies

Table A.2.2:   OLS Regression Results for Ownership Concentration Models, Including Time Dummies ← XVI | XVII →

Table A.3.1:   Random-Effects Regression Results for Ownership Concentration Models

Table A.4.1:   Pooled 2SLS Regression Results for Ownership Concentration Models

Table A.4.2:   Weak Instruments Diagnostics (2SLS Without Fixed Effects)

Table A.4.3:   Results from Model Specification Tests (OLS vs. 2SLS Without Fixed Effects) ← XVII | XVIII → ← XVIII | XIX →

List of Abbreviations

Details

Pages
XXIV, 321
ISBN (PDF)
9783653062755
ISBN (ePUB)
9783653960068
ISBN (MOBI)
9783653960051
ISBN (Softcover)
9783631667156
Language
English
Publication date
2016 (April)
Published
Frankfurt am Main, Berlin, Bern, Bruxelles, New York, Oxford, Wien, 2016. XXIV, 321 pp., 48 tables

Biographical notes

Katinka Wölfer (Author)

Katinka Wölfer studied business administration at EBS Universität für Wirtschaft und Recht (Germany), the University of Gießen (Germany), the University of Wisconsin-Milwaukee (USA) and the University of Kentucky (USA). In recognition of academic excellence, she was selected for membership in Beta Gamma Sigma. Her research interests center on corporate finance and strategic management.

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Title: Ownership Structure and Corporate Performance