Company performance under multiple ownership classes.

Abstract

Abstract We develop a new method of ownership classification and examine the impact of various owners on firm performance. Prior research focuses mainly on managerial ownership and/or a few general classifications (block-holders vs. non-block-holders, institutional vs. non-institutional). No prior studies attempt to model all corporate owners together in one model. This study fills this gap. Our classification divides listed corporations into government, institutional, public, managerial, family, and foreign owners. Analyzing and comparing these companies yields several important findings. First, government and institutional firms perform the best, while public and managerial firms perform the worst. Second, the OLS and simultaneous system 2SLS estimates suggest that government and institutional ownership contribute positively to firm performance, while public ownership has a negative effect. Incorporating the potential endogeneity issue into the system suggests that the relationship is bidirectional, where the causality runs from ownership to performance and vice versa. JEL: G14, G32, D23, L14