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One Share – One Vote: new evidence from the Nordic countries

  • Eklund, Johan E

    ()

    (Ratio Institute, CESIS and JIBS)

This paper examines how ownership concentration affects investment performance, and in particular how deviations from the one share-one vote principle affect this ownership-performance relationship. Using a unique panel from the Nordic countries the so-called incentive and managerial entrenchment effects are isolated. To this end a measure of marginal q is used to evaluate performance. This is a theoretically and empirically more appropriate measure of performance as compared to Tobin’s q. The main finding is that ownership concentration improves performance, whereas dual-class shares reduce the incentive effect and enhance the managerial entrenchment effect. On average, firms with dual-class shares over-invest.

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Paper provided by Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies in its series Working Paper Series in Economics and Institutions of Innovation with number 168.

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Length: 31 pages
Date of creation: 28 Jan 2009
Date of revision:
Handle: RePEc:hhs:cesisp:0168
Contact details of provider: Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Phone: +46 8 790 95 63
Web page: http://www.infra.kth.se/cesis/

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  28. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
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