Ownership Structure and Value of the Largest European Firms: The Importance of Owner Identity

Torben Pedersen and Steen Thomsen ()

Journal of Management & Governance, 2003, vol. 7, issue 1, 27-55

Abstract: The paper examines the relationship betweenownership structure and value of the largestEuropean firms. Using simultaneous estimationand controlling for nation and industry effectswe find that ownership concentration (measuredby the fraction of ``closely held'' shares) hasa positive effect on firm value (market-to-bookvalue of equity), when the largest owner is afinancial institution or another corporation. If the largest owner is a family or a singleindividual, ownership concentration has noeffect on firm value, and the effect isnegative if the largest owner is a governmentorganisation. Firm value is found to have apositive feedback effect on ownershipconcentration except for governments, whichhold higher stakes in low-value firms. Inother words, owner-identity matters,particularly in a Continental Europeaninstitutional setting where ownershipconcentration is high and minority investorprotection is low. Copyright Kluwer Academic Publishers 2003

Keywords: firm value; owner identity; ownership structure; performance (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (44)

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DOI: 10.1023/A:1022480016567

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