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Does it matter who owns firms? Evidence on the impact of supermajority control on private firms in Europe

Author

Listed:
  • Saul Estrin

    (Department of Management, London School of Economics and Political Science, London, UK)

  • Jan Hanousek

    (Department of Economics, Faculty of Business and Economics, Mendel University in Brno, Zemedelska 1, 613 00 Brno, Czech Republic; CEPR, London, UK)

  • Anastasiya Shamshur

    (King's Business School, King's College London, London, UK)

Abstract

We explore how the type of owner affects private enterprise investment decisions in Europe. In contrast to the literature, we analyze firms with concentrated (more than 95%) ownership stakes to reduce the potential that agency problems contaminate our results. We consider four types of supermajority owners – family, institutional, corporate, and state and use detailed ownership and financial information from a large sample of private firms from 24 European countries from 2001 to 2018. We find that family-owned firms exhibit higher gross investment rates and substantially higher sensitivity to investment opportunities, profitability, cash flow, and value-added growth compared to corporate and institutional owners. At the same time, and more consistent with the literature, family-owned firms invest significantly less in intangible assets than other ownership types. To demonstrate the robustness of our results, we employ matching samples complemented by analysis of owner-type transitions from family owners to corporate and institutional owners.

Suggested Citation

  • Saul Estrin & Jan Hanousek & Anastasiya Shamshur, 2023. "Does it matter who owns firms? Evidence on the impact of supermajority control on private firms in Europe," MENDELU Working Papers in Business and Economics 2023-91, Mendel University in Brno, Faculty of Business and Economics.
    • Handle: RePEc:men:wpaper:91_2023
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    More about this item

    Keywords

    private firms; panel data; Europe; ownership types; investments; cash flow sensitivity; profitability; business opportunities;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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