Pedersen, Torben (Department of International Economics and Management, Copenhagen Business School) Thomsen, Steen (Department of International Economics and Management, Copenhagen Business School) Kvist, Hans Kurt (The Statistics Group, Copenhagen Business School)
Abstract
We examine the causal relationship between blockholder ownership (measured by the fraction of shares controlled by large shareholders) and firm value (measured as the simple Tobin's Q) of the largest EU and US companies. Using Granger causality tests we find no significant causal effects either way in the US/UK, but in continental Europe we find a negative effect of blockholder ownership on firm value and a negative effect of firm value on blockholder ownership. Consistent with an overall non-linear relationship, as hypothesised by Morck, Shleifer and Vishny (1988) and Stultz (1988), the negative effect of blockholder ownership on firm value performance is found to be significant only for companies with high initial levels of blockholder ownership (> 10%), but insignificant for companies with low initial levels. Consistent with lower protection of minority investors and larger private benefits of control (Shleifer and Vishny, 1997) the causal relationships are only significant in continental Europe, even for high initial levels of blockholder ownership.
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Publisher Info
Paper provided by Copenhagen Business School, Department of International Economics and Management in its series Working Papers with number
16-2001.
Length: 39 pages Date of creation: 12 Jun 2001 Date of revision: Handle: RePEc:hhb:cbsint:2001-016
Contact details of provider: Postal: Department of International Economics and Management, Copenhagen Business School, Howitzvej 60, DK-2000 Frederiksberg, Denmark Phone: +45 3815 2515 Fax: +45 3815 2500 Web page: http://www.cbs.dk/departments/int/ More information through EDIRC
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References listed on IDEAS 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.:
Shleifer, Andrei & Vishny, Robert W, 1997.
" A Survey of Corporate Governance,"
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[Downloadable!] (restricted)
Other versions:
Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 1999.
"Corporate Ownership Around the World,"
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American Finance Association, vol. 54(2), pages 471-517, 04.
[Downloadable!] (restricted)
Other versions:
Rafael La Porta & Florencio Lopez-deSilanes & Andrei Shleifer & Robert W. Vishny, 1999.
"Investor Protection and Corporate Valuation,"
NBER Working Papers
7403, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions:
Rafael La porta & Florencio Lopez-De-Silanes & Andrei Shleifer & Robert Vishny, 2002.
"Investor Protection and Corporate Valuation,"
Journal of Finance,
American Finance Association, vol. 57(3), pages 1147-1170, 06.
[Downloadable!] (restricted)