CORPORATE OWNERSHIP STRUCTURE AND FIRM PERFORMANCE: EVIDENCE FROM GREEK FIRMS
Bank of Greece
The Berle-Means thesis (1932) implies that diffuse ownership adversely affects firm performance. This paper tries to investigate whether there is strong evidence to support the notion that variations across firms in observed ownership structures result in systematic variations in observed firm performance. We test this hypothesis by assessing the impact of the structure of ownership on corporate performance, measured by profitability, using data for 175 Greek listed firms. Following Demsetz and Villalonga (2001) we model ownership structure, first, as an endogenous variable and, second, we consider two different measures of ownership structure reflecting different groups of shareholders with conflicting interests. Empirical findings suggest that a more concentrated ownership structure positively relates to higher firm profitability. We also find that higher firm profitability requires a less diffused ownership.
Keywords: Ownership structure; Firm performance
JEL classification: G320; G340
We are indebted to Heather Gibson and George Tavlas for useful comments made on an earlier version of the paper. Thanks should be expressed to Themis Antoniou for his valuable information on a part of the data. We would like also to thank the Division of Banking Supervision of the Bank of Greece for kindly providing the data for distribution expenses for the banking industry. Needless to say, the views expressed here are those of the authors and do not necessarily represent those of the Emporiki Bank or the Bank of Greece, while any remaining errors are solely the authors’ responsibility.
Economic Research Department,
Bank of Greece, 21 E. Venizelos Ave.,
102 50 Athens, Greece,
Tel. +30 210-320 2992
Fax: +30 210 323 3025