Ownership Concentration and Firm Valuation in a Typical Frontier Market

Abstract

This study investigates the valuation effect of concentrated ownership in a typical frontier market. Using an extensive sample of Vietnamese publicly listed firms, we find that the valuation effect is inconclusive before combined equity holdings reach a certain threshold beyond which market valuation increases exponentially with ownership. The latter log-linear effect can be interpreted as a more profound dominance of the monitoring incentives of large shareholders over the potential expropriation of minority shareholders at higher levels of concentration. Our finding reconciles the seemingly conflicting results of previous studies and contributes to understanding corporate governance practices in frontier markets.

Keywords: ownership concentration, market valuation, piecewise linear regression, frontier markets, Vietnam

JEL Classification: G30, G32, G34