Equity Ownership and Performance: An Empirical Study of German Traded Companies
Corporate governance has been at the center of interest in the corporate- nance literature for the past decade. The discussion has continuously int- si?ed due to the occurrence of multiple corporate governance failures which have triggered the introduction or further re?nement of national and inter- tional corporate governance codes. The necessity of regulatory action however rests on the need for a sound understanding of potentially negative e?ects of ownership structure on ?nancial performance. Unfortunately, the empirical literature so far has not delivered consistent evidence leaving the overall e?ects still somewhat in the open. This incons- tency is argued to stem from di?erent biases in the statistical analysis, where the most important ones are the endogeneity and simultaneity bias. The - jective of this dissertation is to provide less distorted results by modelling various ownership aspects and performance simultaneously. The study sets out with a simultaneous equations analysis of the re- tionship between general ownership concentration and performance. This is followed by an examination of more speci?c ownership e?ects with a foll- up model focusing on managerial ownership and another one on institutional ownership. Subsequently, the author combines the three previous models in a ?nal comprehensive analysis which allows for the simultaneous assessment and separation of the di?erent ownership and performance e?ects. Withitsstate-of-the-artanalysis,thedissertationcontributessubstantially to the existing international empirical literature on the relationship between corporate ownership and performance. I wish for this dissertation to give impetus to and become widely accepted by corporate governance researchers and practitioners alike.
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Theoretical Background and Hypotheses 35
Model Methodology and Data
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abnormal returns argument assets Bathala Beta blockholders cash flow rights coefficients companies control rights control variables corporate control corporate governance Debt Demsetz/Lehn 1985 direct effect directors effect on performance effects of ownership endogenous variables entrenchment equity estimates Event study F-test Financial Economics financial performance firms following page Table Herfindahl index Himmelberg hypotheses i3sls increases informational asymmetries insider ownership Insider trading insign institutional investors institutional ownership investment Journal of Financial linear managerial ownership Mbcr methods Main results monitoring Mørck negative effect Ocr Q Ocr OcST OLS regression owner ownership and performance ownership concentration ownership structure p-value page Table performance measures piecewise positive effect private benefits Q MCr Q Ocr Q ratio relation RMSEA Robustness checks Sample Ownership share shareholders significant significantly simultaneous equations squared Statistical methods Main Table continues Tobin’s Q total effect