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Business Groups and the Determinants of Corporate Ownership

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  • Buzzacchi, Luigi
  • Colombo, Massimo G

Abstract

This paper focuses on cross-industry differences in the pattern of corporate ownership in the Italian manufacturing and mining sectors. The authors draw attention to factors responsible for the diffusion of ownership. The paper relies on econometric estimates which confirm the role played by economies of scale, R&D intensity, and specialization of human capital in shaping corporate ownership structures. More importantly, the econometric findings point out that the internal fund allocation function extensively performed by large, diversified business groups significantly distorts the pattern of corporate ownership. Specifically, in low-tech industries where economies of scale are negligible and human capital is unspecialized, when a considerable share of output is attributable to firms controlled by groups whose core activities demand substantial wealth, the ownership share held by unrestricted residual claimants turns out to be well above the value one would otherwise expect. The opposite phenomenon occurs in high-tech, scale-intensive industries. (c) 1996 Academic Press Limited Copyright 1996 by Oxford University Press.

Suggested Citation

  • Buzzacchi, Luigi & Colombo, Massimo G, 1996. "Business Groups and the Determinants of Corporate Ownership," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 20(1), pages 31-51, January.
    • Handle: RePEc:oup:cambje:v:20:y:1996:i:1:p:31-51
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    Cited by:

    1. Giancarlo Giudici & Stefano Paleari, 1997. "Income Shifting in Italian Business Groups and some Governance Implications," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 1(2), pages 207-230, June.
    2. Andrea Goldstein & Nicoletti Giuseppe, 1996. "Italian Privatizations in International Perspective," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 33(100), pages 425-451.
    3. Anaïs Hamelin-Schertzer, 2010. "Is there tunneling in Small Business Groups? Evidence from French SMEs," Working Papers CEB 10-003.RS, ULB -- Universite Libre de Bruxelles.
    4. Andy Cosh & Alan Hughes, 1996. "International merger activity and the national regulation of mergers: A UK perspective," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 23(3), pages 279-302, October.
    5. Serna, Gregorio & Nieto Sánchez, María Jesús, 2002. "On the relationship between a banks equity holdings and bank performance," DEE - Working Papers. Business Economics. WB wb026322, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.

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