Foundation Control and Investment Performance: Do intrinsic aspects of ownership and control matter?

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Dzansi, JamesJönköping University,IHH, Centre for Family Entrepreneurship and Ownership (CeFEO),IHH, Economics, Finance and Statistics (author)

Foundation Control and Investment Performance : Do intrinsic aspects of ownership and control matter?

Article/chapterEnglish2012

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2012
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LIBRIS-ID:oai:DiVA.org:hj-17703
https://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-17703URI

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Language:English
Summary in:English

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Subject category:art swepub-publicationtype

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This paper investigates the relevance of intrinsic motives in the value-enhancing monitoring role of large shareholders. A standard view in the corporate governance literature is that the large shareholder monitors management precisely because of personal financial interests. This paper argues that the exclusive focus on extrinsic considerations sidesteps the intrinsic motives of the large shareholder to minimize managerial opportunism and inefficiency. The paper sheds light on the importance of the intrinsic aspects of firm ownership and control by examining the relative investment performance of foundation controlled firms listed on the Stockholm Stock Exchange during 1999-2005. Foundations are not-for-profit organizations with no residual claimants and thus largely lack the personal financial motives to monitor management. The empirical analysis is carried out in the framework of the marginal q methodology. The results suggest that whereas the typical firm in the sample overinvests, the extent of overinvestment is significantly lower in firms with at least one large shareholder. More importantly, the results suggest that even though foundations largely lack the residual claimants and, hence, the personal financial interest, they are as efficient as other large shareholders in curbing managerial opportunism. This finding is consistent with the view that large shareholders are not only actuated by extrinsic motives to minimize managerial opportunism and inefficiency. Intrinsic motives matter.

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SAMHÄLLSVETENSKAP Ekonomi och näringsliv Nationalekonomi hsv//swe
SOCIAL SCIENCES Economics and Business Economics hsv//eng
Large shareholders
foundations
non-personal wealth incentives
social embeddedness
investment performance

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Jönköping UniversityIHH, Centre for Family Entrepreneurship and Ownership (CeFEO) (creator_code:org_t)

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In:Global Economy & Finance Journal5:2, s. 58-781834-5883

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SOCIAL SCIENCES: SOCIAL SCIENCES; and Economics and Bu ...; and Economics

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By the university: Jönköping University

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