The Direction of Causality between Blockholder Ownership and Firm Value

US and EU Evidence

Torben Pedersen, Steen Thomsen, Hans Kurt Kvist

    Publikation: Working paperForskning

    Resumé

    We examine the causal relationship between blockholder ownership (measured by the fraction of shares controlled by large shareholders) and firm value (measured as the simple Tobin's Q) of the largest EU and US companies. Using Granger causality tests we find no significant causal effects either way in the US/UK, but in continental Europe we find a negative effect of blockholder ownership on firm value and a negative effect of firm value on blockholder ownership. Consistent with an overall non-linear relationship, as hypothesised by Morck, Shleifer and Vishny (1988) and Stultz (1988), the negative effect of blockholder ownership on firm value performance is found to be significant only for companies with high initial levels of blockholder ownership (>10%), but significant for companies with low initial levels. Consistent with lower rotection of minority investors and larger private benefits of control (Shleifer and Vishny, 1997) the causal relationships are only significant in continental Europe, even for high initial levels of blockholder ownership.
    OriginalsprogEngelsk
    Udgivelses stedKøbenhavn
    UdgiverCopenhagen Business School, CBS
    Antal sider39
    StatusUdgivet - 2001

    Emneord

    • Blockholder ownership
    • Firm value
    • Granger causality
    • System effects
    • Panel data analysis

    Citer dette

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    abstract = "We examine the causal relationship between blockholder ownership (measured by the fraction of shares controlled by large shareholders) and firm value (measured as the simple Tobin's Q) of the largest EU and US companies. Using Granger causality tests we find no significant causal effects either way in the US/UK, but in continental Europe we find a negative effect of blockholder ownership on firm value and a negative effect of firm value on blockholder ownership. Consistent with an overall non-linear relationship, as hypothesised by Morck, Shleifer and Vishny (1988) and Stultz (1988), the negative effect of blockholder ownership on firm value performance is found to be significant only for companies with high initial levels of blockholder ownership (>10{\%}), but significant for companies with low initial levels. Consistent with lower rotection of minority investors and larger private benefits of control (Shleifer and Vishny, 1997) the causal relationships are only significant in continental Europe, even for high initial levels of blockholder ownership.",
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    The Direction of Causality between Blockholder Ownership and Firm Value : US and EU Evidence. / Pedersen, Torben; Thomsen, Steen; Kvist, Hans Kurt.

    København : Copenhagen Business School, CBS, 2001.

    Publikation: Working paperForskning

    TY - UNPB

    T1 - The Direction of Causality between Blockholder Ownership and Firm Value

    T2 - US and EU Evidence

    AU - Pedersen, Torben

    AU - Thomsen, Steen

    AU - Kvist, Hans Kurt

    PY - 2001

    Y1 - 2001

    N2 - We examine the causal relationship between blockholder ownership (measured by the fraction of shares controlled by large shareholders) and firm value (measured as the simple Tobin's Q) of the largest EU and US companies. Using Granger causality tests we find no significant causal effects either way in the US/UK, but in continental Europe we find a negative effect of blockholder ownership on firm value and a negative effect of firm value on blockholder ownership. Consistent with an overall non-linear relationship, as hypothesised by Morck, Shleifer and Vishny (1988) and Stultz (1988), the negative effect of blockholder ownership on firm value performance is found to be significant only for companies with high initial levels of blockholder ownership (>10%), but significant for companies with low initial levels. Consistent with lower rotection of minority investors and larger private benefits of control (Shleifer and Vishny, 1997) the causal relationships are only significant in continental Europe, even for high initial levels of blockholder ownership.

    AB - We examine the causal relationship between blockholder ownership (measured by the fraction of shares controlled by large shareholders) and firm value (measured as the simple Tobin's Q) of the largest EU and US companies. Using Granger causality tests we find no significant causal effects either way in the US/UK, but in continental Europe we find a negative effect of blockholder ownership on firm value and a negative effect of firm value on blockholder ownership. Consistent with an overall non-linear relationship, as hypothesised by Morck, Shleifer and Vishny (1988) and Stultz (1988), the negative effect of blockholder ownership on firm value performance is found to be significant only for companies with high initial levels of blockholder ownership (>10%), but significant for companies with low initial levels. Consistent with lower rotection of minority investors and larger private benefits of control (Shleifer and Vishny, 1997) the causal relationships are only significant in continental Europe, even for high initial levels of blockholder ownership.

    KW - Blockholder ownership

    KW - Firm value

    KW - Granger causality

    KW - System effects

    KW - Panel data analysis

    KW - Blockholder ownership

    KW - Firm value

    KW - Granger causality

    KW - System effects

    KW - Panel data analysis

    M3 - Working paper

    BT - The Direction of Causality between Blockholder Ownership and Firm Value

    PB - Copenhagen Business School, CBS

    CY - København

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