The Causal Relationship Between Insider Ownership, Owner Identity, and Market Valuation Among the Largest European Companies

    Publikation: Working paperForskning

    Resumé

    The causal relationship between insider ownership and market valuation is tested by simultaneous estimation of the causes and effect of insider ownership among the largest continental European companies. Controlling for nation and industry effects insider ownership (measured by the fraction of "closely held" shares) is found to have a positive effect on market valuation (market-to-book values). And market valuation is found to have a positive feedback effect on the level of insider ownership. The findings provide empirical support for a theoretical model proposed by La Porta et al (1999). But the results are also found to be sensitive to owner identity: while a higher level of financial and corporate insider ownership is found to increase market valuation, family ownership has no significant effect, and a higher level of government ownership is found to reduce market valuation.
    OriginalsprogEngelsk
    Udgivelses stedKøbenhavn
    UdgiverCopenhagen Business School, CBS
    Antal sider36
    StatusUdgivet - 2001

    Emneord

    • Europa
    • Største virksomheder
    • Virksomhedens ejerskab
    • Værdiansættelse-virksomheder
    • Market valuation
    • Owner identity

    Citer dette

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    abstract = "The causal relationship between insider ownership and market valuation is tested by simultaneous estimation of the causes and effect of insider ownership among the largest continental European companies. Controlling for nation and industry effects insider ownership (measured by the fraction of {"}closely held{"} shares) is found to have a positive effect on market valuation (market-to-book values). And market valuation is found to have a positive feedback effect on the level of insider ownership. The findings provide empirical support for a theoretical model proposed by La Porta et al (1999). But the results are also found to be sensitive to owner identity: while a higher level of financial and corporate insider ownership is found to increase market valuation, family ownership has no significant effect, and a higher level of government ownership is found to reduce market valuation.",
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    author = "Torben Pedersen and Steen Thomsen",
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    AB - The causal relationship between insider ownership and market valuation is tested by simultaneous estimation of the causes and effect of insider ownership among the largest continental European companies. Controlling for nation and industry effects insider ownership (measured by the fraction of "closely held" shares) is found to have a positive effect on market valuation (market-to-book values). And market valuation is found to have a positive feedback effect on the level of insider ownership. The findings provide empirical support for a theoretical model proposed by La Porta et al (1999). But the results are also found to be sensitive to owner identity: while a higher level of financial and corporate insider ownership is found to increase market valuation, family ownership has no significant effect, and a higher level of government ownership is found to reduce market valuation.

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    KW - Virksomhedens ejerskab

    KW - Værdiansættelse-virksomheder

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    KW - Owner identity

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