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Regulation and the Anatomy of Ownership Structures in European Listed Firms

Marc Steffen Rapp

University of Marburg - School of Business & Economics; Marburg Centre for Institutional Economics (MACIE)

Oliver Trinchera

Technische Universität München

March 29, 2013

This paper explores an extensive novel panel-data set covering more than 4,000 listed firms in 16 European countries to study the effects of shareholder protection on ownership structure and firm performance. Recent research criticizes the existing law and finance literature using (i) small-sample country averages and (ii) legal indices of the first generation and casts serious doubts on the seemingly well-established negative correlation between shareholder protection and ownership concentration. Examining overall ownership concentration we provide supportive evidence for a negative effect of shareholder rights, even when we examine a large sample of firms, account for a broad set of firm level characteristics and use second generation legal indices measuring shareholder protection. However, when we differentiate between shareholder types, we find that this effect is mainly driven by strategic investors (including families) and institutional ownership is actually positively correlated to the level of shareholder protection. The latter effect, in turn is mainly driven by independent institutional investors. Examining the effect on firm valuation, we find that while independent institutional investors fuel firm valuation, strategic investors jeopardize firm valuation. Thus, our findings support the view that blockholdings of strategic investors emerge (or survive) in case of limited minority protection at the expense of minority blockholders. Altogether our results contribute to a better understanding of the mechanisms between legal protection, ownership structures and firm valuation.

Number of Pages in PDF File: 55

Keywords: Corporate governance, ownership structure, shareholder protection, institutional ownership, minority shareholders, agency conflicts, Europe

JEL Classification: G20, G32, G38

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Date posted: November 23, 2011 ; Last revised: April 8, 2013

Suggested Citation

Rapp, Marc Steffen and Trinchera, Oliver, Regulation and the Anatomy of Ownership Structures in European Listed Firms (March 29, 2013). Available at SSRN: https://ssrn.com/abstract=1963336 or http://dx.doi.org/10.2139/ssrn.1963336

Contact Information

Marc Steffen Rapp (Contact Author)
University of Marburg - School of Business & Economics ( email )
Am Plan 2
Marburg, D-35037
Marburg Centre for Institutional Economics (MACIE) ( email )
Am Plan
Marburg, 35032
Oliver Trinchera
Technische Universität München ( email )
Arcisstrasse 21
Munich, 80333
+49 89 289 25489 (Phone)
+49 89 289 25488 (Fax)
HOME PAGE: http://www.cefs.de
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