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Corporate Ownership Structure and Firm Performance: Evidence from Greek Firms

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Author Info
Panayotis Kapopoulos (Emporiki Bank)
Sophia Lazaretou () (Bank of Greece, Economic Research Department)

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Abstract

The Berle-Means thesis (1932) implies that diffuse ownership adversely affects firm performance. This paper tries to investigate whether there is strong evidence to support the notion that variations across firms in observed ownership structures result in systematic variations in observed firm performance. We test this hypothesis by assessing the impact of the structure of ownership on corporate performance, measured by profitability, using data for 175 Greek listed firms. Following Demsetz and Villalonga (2001) we model ownership structure, first, as an endogenous variable and, second, we consider two different measures of ownership structure reflecting different groups of shareholders with conflicting interests. Empirical findings suggest that a more concentrated ownership structure positively relates to higher firm profitability. We also find that higher firm profitability requires a less diffused ownership.

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Paper provided by Bank of Greece in its series Working Papers with number 37.

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Length: 33 pages
Date of creation: Apr 2006
Date of revision:
Handle: RePEc:bog:wpaper:37

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Related research
Keywords: Money demand Ownership structure Firm performance

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Find related papers by JEL classification:
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Demsetz, Harold & Lehn, Kenneth, 1985. "The Structure of Corporate Ownership: Causes and Consequences," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1155-77, December. [Downloadable!] (restricted)
  2. Loderer, Claudio & Martin, Kenneth, 1997. "Executive stock ownership and performance Tracking faint traces," Journal of Financial Economics, Elsevier, vol. 45(2), pages 223-255, August. [Downloadable!] (restricted)
  3. Demsetz, Harold & Villalonga, Belen, 2001. "Ownership structure and corporate performance," Journal of Corporate Finance, Elsevier, vol. 7(3), pages 209-233, September. [Downloadable!] (restricted)
  4. Short, Helen & Keasey, Kevin, 1999. "Managerial ownership and the performance of firms: Evidence from the UK," Journal of Corporate Finance, Elsevier, vol. 5(1), pages 79-101, March. [Downloadable!] (restricted)
  5. G.A. Karathanassis & A.A. Drakos, 2004. "A note on equity ownership and corporate value in Greece," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(8), pages 537-547. [Downloadable!]
  6. Benjamin E. Hermalin & Michael S. Weisbach, 1988. "The Determinants of Board Composition," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 589-606, Winter. [Downloadable!] (restricted)
  7. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January. [Downloadable!] (restricted)
  8. Randall K. Morck & Lloyd Steier, 2005. "The Global History of Corporate Governance: An Introduction," NBER Working Papers 11062, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Demsetz, Harold, 1983. "The Structure of Ownership and the Theory of the Firm," Journal of Law & Economics, University of Chicago Press, vol. 26(2), pages 375-90, June.
  10. McConnell, John J. & Servaes, Henri, 1990. "Additional evidence on equity ownership and corporate value," Journal of Financial Economics, Elsevier, vol. 27(2), pages 595-612, October. [Downloadable!] (restricted)
  11. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November. [Downloadable!] (restricted)
  12. Chung, Kee H. & Pruitt, Stephen W., 1996. "Executive ownership, corporate value, and executive compensation: A unifying framework," Journal of Banking & Finance, Elsevier, vol. 20(7), pages 1135-1159, August. [Downloadable!] (restricted)
  13. Smirlock, Michael & Gilligan, Thomas & Marshall, William, 1984. "Tobin's q and the Structure-Performance Relationship," American Economic Review, American Economic Association, vol. 74(5), pages 1051-60, December. [Downloadable!] (restricted)
  14. Lindenberg, Eric B & Ross, Stephen A, 1981. "Tobin's q Ratio and Industrial Organization," Journal of Business, University of Chicago Press, vol. 54(1), pages 1-32, January. [Downloadable!] (restricted)
  15. Himmelberg, Charles P. & Hubbard, R. Glenn & Palia, Darius, 1999. "Understanding the determinants of managerial ownership and the link between ownership and performance," Journal of Financial Economics, Elsevier, vol. 53(3), pages 353-384, September. [Downloadable!] (restricted)
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  16. Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, 04. [Downloadable!] (restricted)
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  17. Palia, Darius & Lichtenberg, Frank, 1999. "Managerial ownership and firm performance: A re-examination using productivity measurement," Journal of Corporate Finance, Elsevier, vol. 5(4), pages 323-339, December. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Sven W. Arndt, 2006. "Regional Currency Arrangements in North America," Working Papers 40, Bank of Greece. [Downloadable!]
    Other versions:
  2. Hans Genberg, 2006. "Exchange-Rate Arrangements and Financial Integration in East Asia: On a Collision Course?," Working Papers 41, Bank of Greece. [Downloadable!]
  3. Richard N. Cooper & Michael Bordo & Harold James, 2006. "What About a World Currency? Proposal for a Common Currency among Rich Democracies. One World Money, Then and Now," Working Papers 44, Bank of Greece. [Downloadable!]
  4. Andreas S. Andreou & George A. Zombanakis, 2006. "Computational Intelligence in Exchange-Rate Forecasting," Working Papers 49, Bank of Greece. [Downloadable!]
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