Does it matter who owns firms? Evidence on the impact of supermajority control on private firms in Europe

Saul Estrin, Jan Hanousek and Anastasiya Shamshur

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We explore how the type of owner affects private enterprise investment decisions in Europe. In contrast to the literature, we analyze firms with concentrated (>95%) ownership stakes to reduce the potential that agency problems contaminate our results. We consider four types of supermajority owners – family, institutional, corporate, and state and use detailed ownership and financial information from a large sample of private firms from 24 European countries from 2001 to 2018. We find that family-owned firms exhibit higher gross investment rates and substantially higher sensitivity to investment opportunities, profitability, cash flow, and value-added growth compared to corporate and institutional owners. At the same time, and more consistent with the literature, family-owned firms invest significantly less in intangible assets than other ownership types. To demonstrate the robustness of our results, we employ matching samples complemented by analysis of owner-type transitions from family owners to corporate and institutional owners.

Keywords: private firms; panel data; Europe; ownership types; investments; cash flow sensitivity; profitability; business opportunities (search for similar items in EconPapers)
JEL-codes: G31 G32 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2024-10-01
New Economics Papers: this item is included in nep-acc, nep-cfn, nep-eec and nep-eur
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Published in International Review of Financial Analysis, 1, October, 2024, 95. ISSN: 1057-5219

Downloads: (external link)
http://eprints.lse.ac.uk/124030/ Open access version. (application/pdf)

Related works:
Journal Article: Does it matter who owns firms? Evidence on the impact of supermajority control on private firms in Europe (2024)
Working Paper: Does it matter who owns firms? Evidence on the impact of supermajority control on private firms in Europe (2023)
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