Ownership structure and economic performance in the largest European companies

The paper examines the impact of ownership structure on company economic pe rformance in 435 of the largest European companies. Controlling for industr y, capital structure and nation effects we fmd a positive effect of ownersh ip concentration on shareholder value (market-to-book value of equity) and profitability (asset returns), but the effect levels off for high ownership shares. Furthermore we propose and support the hypothesis that the identit y of large owners - family, bank, institutional investor, government, and o ther companies - has important implications for corporate strategy and perf ormance. For example, compared to other owner identities, financial investo r ownership is found to be associated with higher shareholder value and pro fitability, but lower sales growth. The effect of ownership concentration i s also found to depend on owner identity. Copyright (C) 2000 John Whey & So ns, Ltd.