Competition and Ownership Structure of Closely-Held Firms

Review of Financial Studies (2017)

86 Pages Posted: 18 Nov 2013 Last revised: 7 Feb 2018

See all articles by Jan Bena

Jan Bena

University of British Columbia - Sauder School of Business

Ting Xu

University of Virginia - Darden School of Business

Date Written: May 8, 2017

Abstract

We study how product market competition affects firms’ ownership structures using a large sample of closely-held firms in 18 European countries. We show that firms operating in more competitive environments have lower inside ownership and that the stakes of their outside shareholders are more dispersed. These results are explained by competition increasing the need to raise external equity and reducing private control benefits. Our findings suggest that, by changing corporate ownership structure, competition mitigates incentive misalignment among shareholders, leading to better firm performance and gains in economic efficiency.

Keywords: Ownership structure, closely-held firms, inside ownership, ownership concentration, product market competition, corporate governance

JEL Classification: G32, F14

Suggested Citation

Bena, Jan and Xu, Ting, Competition and Ownership Structure of Closely-Held Firms (May 8, 2017). Review of Financial Studies (2017), Available at SSRN: https://ssrn.com/abstract=2356526 or http://dx.doi.org/10.2139/ssrn.2356526

Jan Bena (Contact Author)

University of British Columbia - Sauder School of Business ( email )

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Vancouver, BC V6T 1Z2
Canada
+1 604 822 8490 (Phone)

HOME PAGE: http://www.janbena.com

Ting Xu

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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