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Ownership Structure and Value of the Largest European Firms: The Importance of Owner Identity

  • Torben Pedersen
  • Steen Thomsen

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    The paper examines the relationship betweenownership structure and value of the largestEuropean firms. Using simultaneous estimationand controlling for nation and industry effectswe find that ownership concentration (measuredby the fraction of ``closely held'' shares) hasa positive effect on firm value (market-to-bookvalue of equity), when the largest owner is afinancial institution or another corporation. If the largest owner is a family or a singleindividual, ownership concentration has noeffect on firm value, and the effect isnegative if the largest owner is a governmentorganisation. Firm value is found to have apositive feedback effect on ownershipconcentration except for governments, whichhold higher stakes in low-value firms. Inother words, owner-identity matters,particularly in a Continental Europeaninstitutional setting where ownershipconcentration is high and minority investorprotection is low. Copyright Kluwer Academic Publishers 2003

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    File URL: http://hdl.handle.net/10.1023/A:1022480016567
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    Article provided by Springer in its journal Journal of Management and Governance.

    Volume (Year): 7 (2003)
    Issue (Month): 1 (March)
    Pages: 27-55

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    Handle: RePEc:kap:jmgtgv:v:7:y:2003:i:1:p:27-55
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