Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 71: Ownership Structure, Control and Firm Performance: The Effects of Vote Differentiated Shares

Per-Olof Bjuggren (), Johan Eklund () and Daniel Wiberg ()
Additional contact information
Per-Olof Bjuggren: Jönköping International Business School, Postal: Department of Economics , P.O. Box 1026, SE-551 11 Jönköping, SWEDEN
Johan Eklund: Jönköping International Business School, Postal: Department of Economics , P.O. Box 1026, SE-551 11 Jönköping, SWEDEN
Daniel Wiberg: Jönköping International Business School, Postal: Department of Economics , P.O. Box 1026, SE-551 11 Jönköping, SWEDEN

Abstract: This paper contributes to the literature on ownership, control and performance by exploring these relationships for Swedish listed companies (1997-2002). We find that firms, on average, are making inferior investment decisions and that the use of dual-class shares have a negative effect on performance. According to our results concentration of ownership has a negative impact on investment performance and firm value when control instruments that separate votes from capital share are used. Marginal q is used as a measure of economic performance. It was presented in an article by Mueller and Reardon in 1993 and has recently been used in empirical studies of ownership and performance by among others Gugler and Yurtoglu (2003). Frequently Tobin’s q is used in studies of this type, but Tobin’s q has a number of disadvantages which can be circumvented by employing a marginal q. This study adds to earlier studies by investigating how the separation of vote and capital shares’ creates a wedge between the incentives and the ability to pursue value maximization. The relationships between the performance measure and different ownership characteristics like ownership concentration and foreign ownership are also investigated.

Keywords: marginal q; ownership structure; firm performance; investments; dual-class shares

JEL-codes: C23; D21; G30; K22; L20

18 pages, October 27, 2005

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