An Analysis of Majority Owner-Managed Companies in the UK

21 Pages Posted: 3 Nov 2008

See all articles by David Hillier

David Hillier

University of Strathclyde - Department of Accounting and Finance

Patrick McColgan

University of Strathclyde

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Abstract

This paper investigates the characteristics of 73 UK companies in which managers have an ownership stake of greater than 50 per cent. We find that majority owner-managed companies make less use of alternative corporate control systems and are less likely to remove their chief executive officer or other board members following poor performance. However, our sample firms actually outperform diffusely held companies of similar size in the same industry. The determinants of majority control appear more closely related to the characteristics of the controlling shareholders rather than the firm's operating environment. Changes in the ownership structure of our sample companies owe more to changes in owner-specific characteristics and security issuance than they are related to changes in the company's operating environment or company performance. We conclude that despite the obvious agency costs of managerial entrenchment for closely held companies, for the present sample at least the incentive alignment benefits of large director shareholdings are beneficial to outside shareholders.

JEL Classification: G32, G34, G15

Suggested Citation

Hillier, David and McColgan, Patrick, An Analysis of Majority Owner-Managed Companies in the UK. Accounting & Finance, Vol. 48, No. 4, pp. 603-623, December 2008. Available at SSRN: https://ssrn.com/abstract=1291180 or http://dx.doi.org/10.1111/j.1467-629X.2007.00253.x

David Hillier (Contact Author)

University of Strathclyde - Department of Accounting and Finance ( email )

Curran Building
100 Cathedral Street
Glasgow G4 0LN
United Kingdom
44 0141 330 4809 (Phone)
44 0141 330 4442 (Fax)

Patrick McColgan

University of Strathclyde ( email )

Curran Building
100 Cathedral Street
Glasgow, G4 0LN
United Kingdom
+44 1415483690 (Phone)

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