Ownership Structure, Control and Firm Performance: The Effects of Vote Differentiated Shares

Per-Olof Bjuggren (), Johan Erik Eklund () and Daniel Wiberg

No 71, Ratio Working Papers from The Ratio Institute

Abstract: This paper contributes to the literature on ownership, control and performance by exploring these relationships for Swedish listed companies (1997-2002). We find that firms, on average, are making inferior investment decisions and that the use of dual-class shares have a negative effect on performance. According to our results concentration of ownership has a negative impact on investment performance and firm value when control instruments that separate votes from capital share are used. Marginal q is used as a measure of economic performance. It was presented in an article by Mueller and Reardon in 1993 and has recently been used in empirical studies of ownership and performance by among others Gugler and Yurtoglu (2003). Frequently Tobin’s q is used in studies of this type, but Tobin’s q has a number of disadvantages which can be circumvented by employing a marginal q. This study adds to earlier studies by investigating how the separation of vote and capital shares’ creates a wedge between the incentives and the ability to pursue value maximization. The relationships between the performance measure and different ownership characteristics like ownership concentration and foreign ownership are also investigated.

Keywords: marginal q; ownership structure; firm performance; investments; dual-class shares (search for similar items in EconPapers)
JEL-codes: C23 D21 G30 K22 L20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-fin, nep-fmk and nep-law
Date: 2005-10-27
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Journal Article: Ownership structure, control and firm performance: the effects of vote-differentiated shares (2007)
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