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Insider ownership and corporate performance: evidence from Germany

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  • Christoph Kaserer

    ()

  • Benjamin Moldenhauer

    ()

Abstract

In this paper we address the question whether insider ownership affects corporate performance. Evidence coming from studies dealing with Anglo-Saxon countries is rather inconclusive, especially because it seems that results are significantly affected by endogeneity. Economically, this is due to the fact that in these countries insider ownership seems to be mainly driven by management's compensation contracts. We argue that Germany is different in this regard, as insider ownership often is related to family control, stock-based compensation is less widespread and the market for corporate control is less developed. Starting from this presumption our data allows to make an unbiased observation as to whether insider ownership affects firm performance. Using a pooled data set of 648 firm observations for the years 2003 and 1998 we find evidence for a positive and significant relationship between corporate performance as measured by stock price performance, market-to-book ratio and return on assets and insider ownership. This relationship seems to be rather robust, even if we account for endogeneity by applying a 2SLS regression approach. Moreover, we also find outside block ownership as well as more concentrated insider ownership to have a positive impact on corporate performance. Overall the results indicate that ownership structure might be an important variable explaining the long term value creation in the corporate sector. --

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File URL: http://hdl.handle.net/10.1007/s11846-007-0009-3
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Bibliographic Info

Article provided by Springer in its journal Review of Managerial Science.

Volume (Year): 2 (2008)
Issue (Month): 1 (March)
Pages: 1-35

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Handle: RePEc:spr:rvmgts:v:2:y:2008:i:1:p:1-35

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Web page: http://www.springer.com/business/journal/11846

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Related research

Keywords: Ownership structure; Shareholder structure; Insider ownership; Firm performance; Corporate governance; Agency costs; G32;

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References

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Cited by:
  1. Achleitner, Ann-Kristin & Kaserer, Christoph & Kauf, Tobias & Volk, Sarah, 2010. "DAXplus family: Ein Aktienindex zur Darstellung der Performance von Familienunternehmen," CEFS Working Paper Series 2010-05, Center for Entrepreneurial and Financial Studies (CEFS), Technische Universität München.
  2. Schmid, Thomas & Ampenberger, Markus & Kaserer, Christoph & Achleitner, Ann-Kristin, 2010. "Controlling shareholders and payout policy: do founding families have a special 'taste for dividends'?," CEFS Working Paper Series 2010-01, Center for Entrepreneurial and Financial Studies (CEFS), Technische Universität München.
  3. Hearn, Bruce, 2011. "The impact of corporate governance measures on the performance of West African IPO firms," Emerging Markets Review, Elsevier, vol. 12(2), pages 130-151, June.
  4. Lai, Jung-Ho & Chen, Li-Yu & Chang, Shao-Chi, 2012. "The board mechanism and entry mode choice," Journal of International Management, Elsevier, vol. 18(4), pages 379-392.
  5. Hakim Abdolkhani & Reza Jalali, 2013. "Effect of Managerial Ownership Concentrated on Firm Return and Value: Evidence from Iran Stock Market," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(1), pages 46-51, January.
  6. Hearn, Bruce, 2011. "The performance and the effects of family control in North African IPOs," International Review of Financial Analysis, Elsevier, vol. 20(3), pages 140-151, June.
  7. Hearn, Bruce, 2014. "The impact of institutions, ownership structure, business angels, venture capital and lead managers on IPO firm underpricing across North Africa," Journal of Multinational Financial Management, Elsevier, vol. 24(C), pages 19-42.

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