The Ownership Structure of Private Firms: Concentration and Persistence
41 Pages Posted: 5 Sep 2019
Date Written: September 4, 2019
We find that ownership concentration is much larger in private firms than in public firms, much more persistent, and changes more once change happens. Analyzing the population of Norwegian firms during fifteen years, we show that the average largest owner of a private (public) firm holds 49% (26%) of the equity, holds the same stake in two consecutive years in 82% (14%) of the cases, and alters the stake by 9(8) percentage units when the stake changes. These differences are greater when the largest owner is a family. This evidence suggests that control rights in private firms provide particularly high benefits that are costly to trade. We use system GMM to show that the strong persistence of ownership makes past ownership dominate any other determinant of current ownership proposed in the literature, and that the relationship becomes highly misleading if we use economic models or econometric techniques that ignore ownership persistence. These findings also suggest that ownership can be considered an exogenous determinant of economic outcomes in private firms.
Keywords: Ownership, Concentration, Persistence, Dynamics, Private Firms, Family Firms, System Gmm, Register Data
JEL Classification: G30, G32
Suggested Citation: Suggested Citation