![Sample our Economics, Finance,Business & Industry journals, sign in here to start your access, latest two full volumes FREE to you for 14 days]({"type":"image" , "src" : "/sda/5931/TOC-Subject-Sample-2021-Economics-Finance-Business-Industry.jpg"})
This paper evaluates the impact of ownership concentration on firm performance in a weak institutional environment. Specifically, using new survey evidence, we seek to appraise quantitatively the performance of block-holder-controlled firms in Russia and to identify, within the domain of corporate governance theory, factors that may explain such performance. We find evidence of negative association between the size of the dominant owners’ shareholding and performance parameters such as investment, capacity utilization, and profitability. At the same time, we establish that control structures with multiple, large shareholders increase efficiency. The ambiguity of the effects of ownership concentration suggests that country-specific factors play an important role.
Acknowledgements
The authors wish to thank Dr Roger Strange for his valuable comments on an earlier draft.
Notes
1. For example, the estimates of the share of family-controlled firms among the largest American industrial corporations vary from 35% (Anderson and Reeb 2003) to as high as 60% (Zeitlin 1974).
2. This is not to say that pursuing non-pecuniary private benefits cannot result in value destruction. The receivers of such benefits may place higher premium on retaining them than on securing the expansion and growth of the firm to the detriment of smaller shareholders (Thomsen, Pedersen, and Kvist 2006).
3. The Center's analytical bulletin REB: Market Situation Tests, Estimates, Forecasts is published four times a year and is available in English.
4. We omit the discussion of effects of control variables which are similar to results obtained for panel estimates.
5. The Russian legal system offers inadequate protection of legitimate owners, even if they hold majority of stakes. In the West, hostile takeovers are feasible when shares of the target company are widely available and easily purchased. In Russia, hostile takeovers rely on the abuse of the rights of shareholders and the exploitation of legalistic hitches and corruption in the judicial system. One of the common tricks is to obtain a judicial decision that bans the current owners of the firm to use their right to vote in the shareholders general meeting or take a position on the board of directors. Another ploy is to make the court requisite the registry of shareholders, the only legal proof of ownership, and then replace it with an alternative registry with a different composition of shareholders (Sizov 2004). One notorious incident involved Krasnoyarsk Aluminium, which deleted from its share register a 20% stake held by the British Trans World Group, effectively wiping out its holding (Mileusnic 1996).