Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 98: Corporate Governance and Investments in Scandinavia - ownership concentration and dual-class equity structure

Johan E. Eklund ()
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Johan E. Eklund: JIBS and CESIS

Abstract: Juridical-political theories suggest that legal origin (La Porta et al. (1997)) and political factors (Roe (2003)) matters for firm performance. In Scandinavia there are a number of legal practices, with common political roots, that impinge on the distribution of corporate control, which accordingly may affect firm performance. This paper examines the return on investments and the effects of ownership concentration in a large sample of listed Scandinavian firms. As a performance measure marginal q developed by Mueller and Reardon (1993) is used. Marginal q measures the marginal return on capital relative its cost of capital. This is a more appropriate measure of performance than Tobin’s average q. The question of how ownership concentration affects managerial investment decisions is examined. A Scandinavian corporate governance feature is the wide spread use of vote-differentiation. How deviations from the one-share-one-vote principle affects this ownership-performance relationship is analyzed.

Keywords: Investments; Marginal q; Corporate Governance; Ownership Concentration; Dual-Class Shares

JEL-codes: C23; G30; K22; L25

36 pages, September 6, 2007

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