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Ownership Structure and Corporate Performance

A Panel Data Analysis for the German Market

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Katinka Wölfer

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.
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7 Conclusion

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7      Conclusion

A clear understanding of the relation between ownership structure and corporate performance is of great importance both to corporate decision makers who aim to create shareholder value (and other objectives) and to public policy. From a public policy perspective, ownership – more precisely, the quality of ownership engagement – plays a major role for effective capital allocation and monitoring of corporate performance (Çelik & Isaksson, 2014). A well-functioning market economy relies on shareholders to price and allocate capital among different business opportunities and to monitor these companies to make sure that they make the best possible use of the invested capital. It is in the self-interest of shareholders to gather information on the company's prospects and, whenever necessary, use this information to engage with the company and influence key decisions. This ownership engagement brings new and unique information to the economy. The new information will improve the allocation of productive resources and make better use of those resources that are already employed. Ownership engagement is therefore essential to value creation and economic growth. In order to assume this socially beneficial role, shareholders have also been given the legal rights to exercise it, which includes the transferability of shares, access to information, participation in key decisions concerning fundamental corporate changes, and the election of the board of directors. However, exercising these rights is always associated with certain costs, which some shareholders are motivated to bear and some are not. Shareholders who, for some reason, do not find it worthwhile...

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