Does Large Owners Matter? An empirical study of publicly listed companies before, during and after the financial crisis

Jonas Svendsen & Esben Witt

Student thesis: Master thesis


This thesis investigates the relationship between the presence of a large owner (i.e. blockholder) among company’s shareholders and the company’s performance using a sample of more than 6.500 companies from 50 countries. For this purpose, we compare the performance of companies with a controlling owner relative to widely held companies at three time periods, during and after the financial crisis in 2008-2009. Existing theory argues that companies will benefit from a controlling blockholder since large owners have a stronger incentive to monitor their investments compared to small investors. However, following the extant literature on family control, we propose that the relationship between blockholders and company performance may be negative when the controlling blockholder is a family; this should be so particularly during a crisis since family owners may be more prone to use corporate resources to meet a personal liquidity need, thus jeopardizing company’s restructuring following an external shock. Our study is founded in agency theory. Relying on this theoretical framework and a broad review of the relevant literature, we formulate 8 hypotheses, which we test using our international sample of our data. Our results indicate that blockholders (family and non-family) associate positively with company’s performance; the companies large owners outperform relative to companies that are widely held. This relationship is significant for all four of our performance measures, and is robust to various checks. We do, however, observe that the positive effect diminishes during and after the financial crisis. We argue, from an agency theory perspective, the positive association between the controlling blockholders (family and non-family) and company’s performance is due to the large owners’ increased engagement when their wealth is more tightly tied to the company’s, which leads to lower agency costs. We also argue that these owners may be worse in maintaining the superior performance during a financial crisis, because they expropriate their ownership; families might use corporate resources to meet personal credit and liquidity needs and institutional investors might engage in other self-dealing activities like tunneling.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2014
Number of pages115