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Ownership dynamics and firm performance in an emerging economy: a meta-analysis of the Russian literature
Abstract
This paper provides a meta-analysis of studies on the effect of ownership on the performance of Russian firms over 20 years of rapid institutional and economic changes. We review 29 studies extracted from the EconLit and Web of Science databases with a total of 877 relevant estimates. We find that the government negatively affects company performance regardless of its administrative level. In contrast, private ownership is positively associated with firm performance. However, the effect size and statistical significance are notably varied among different types of private ownership. While the effect of insider (employee and management) ownership is comparable to that of foreign investors, the effect of domestic outsider investors is considerably smaller. Our assessment of publication selection bias reveals that the existing literature does not contain genuine evidence for a series of ownership types and, therefore, some of the findings have certain limitations.
... Неоднозначен и взгляд на роль государства как собственника. Так, подтверждена гипотеза об устойчиво негативном влиянии государственной собственности на финансовые показатели деятельности компаний [Iwasaki, Mizobata, Muravyev, 2018]. Полученный результат соответствует большинству эмпирических исследований, выполненных в отношении как развитых [Pedersen, Thomsen, 2003;Meoli, Paleari, Vismara, 2009;Malighetti et al., 2011], так и формирующихся рынков [Cheung, Rau, Stouraitis, 2010;Анкудинов, Лебедев, 2014]. ...
... При этом в ходе анализа делалась поправка на отраслевую специфику. Доказано также негативное влияние владения государством долей акционерного капитала [Iwasaki, Mizobata, Muravyev, 2018]. ...
... Оказалась верной гипотеза 2 о том, что участие государства в акционерном капитале оказывает негативный эффект на создание стоимости. Этот вывод совпадает с результатами исследований [Pedersen, Thomsen, 2003;Meoli, Paleari, Vismara, 2009;Malighetti et al., 2011;Iwasaki, Mizobata, Muravyev, 2018] и др. В дополнение к приведенным выше аргументам отметим, что указанный эффект может быть также следствием отрица-тельного восприятия рынком всей системы корпоративного управления и корпоративного менеджмента государственных компаний, недостаточности систем внутреннего контроля, в том числе за потенциальными конфликтами интересов, ввиду которых возникают масштабные злоупотребления. ...
Abstract. The main purpose of organizational behavior approaches is to increase organizational efficiency by improving employees'moraleand motivation. Manyfactors support and inhibit the productivity and motivation of employees in organizations. In the literature, these are referred to as pro-organizational approaches and counterproductive work behavior. The study aims to examine the relationship between organizational silence, intention to quit, and organizational loneliness. Organizational silence is the conscious denial of the employee's mental contribution to their company's activity due to organizational and managerial reasons. Organizational loneliness refers to a negative emotional state experienced by employees in the workplace due to incompatible normative factors (culture, belief, and values). Methodologically, the study relies on the counterproductive work behavior theory, which states that employees act against the interests of an organization and experience lack of motivation and productivity. The research data were collected from employees working for public and private banks in Konya and Ankara,Turkey. To analyse the data, descriptive statistics and correlation analysis were performed using SPSS22.0 and AMOS software. The study shows that organizational loneliness has a mediating role in the relationship between organizational silence and intention to quit. It has also been determined that the unfavorable working conditions, which cause employees' perception of organizational silence, strengthen the employees' intention to quit their job and their perception of organizational loneliness. The study's theoretical and practical results show that taking measures to increase employees' morale and motivation in organizations will enhance their work performance.
... Moreover, the Russian corporate system in general is represented by high levels of ownership concentration. According to Iwasaki et al. (2018), in 2015, for approximately 60% of the corporate companies in Russia, the ownership stakes of the largest shareholders exceeded 50%. Russian agri-food production is therefore dominated by a small number of large-scale corporate farms, which in turn are controlled by very few shareholders. ...
... In this study, we focus primarily on three types of ownership identities 1 that seem to be most relevant in the Russian context (Davydova and Tleubayev et al. Volume 23, Issue 2, 2020 Franks, 2015; Iwasaki et al., 2018): managerial ownership, state ownership and business group (agroholding) ownership, each one representing an ownership identity and ownership share of the largest shareholder. ...
... via vertical and/or horizontal integration (Davydova and Franks, 2015). Business groups therefore have both incentives and the potential to take an active role in the corporate governance of their affiliates (Iwasaki et al., 2018). Furthermore, members of the business groups can benefit from the intra-group transfer of technology and have access to internal capital, labor and trade markets (Belenzon et al., 2013;Wan, 2005). ...
This article provides pioneering empirical evidence on the ownership structure and firm performance relationship for the case of corporate agri-food companies in Russia. While Russia plays a vital role in the global agri-food system, its domestic agri-food production is evidently dominated by a small number of corporate enterprises, which are in turn characterized by high ownership concentration. We employ unique panel data obtained from 203 companies for the years between 2012 and 2017. A random effects model was used to analyze the impacts of ownership concentration and ownership identity on the firms’ financial performance, measured by return on assets and return on sales. Our results indicate an inverse U-shaped association between ownership concentration and firm performance, with average level of ownership concentration found to be on the descending range of the inverse U-shaped curve. Moreover, we observe a similar quadratic relationship between ownership concentration by government and directors and firm performance. On average, ownership by directors was found to be on the ascending range and below the peak point, suggesting a potential for further performance improvement, while the impact of agroholding ownership was found to be linear and positive.
... Third, we contribute to contextual research on state capitalism (Grosman et al., 2016;Lazzarini, 2015;Megginson, 2017;Musacchio et al., 2015) by extending the emerging literature on boards (Muravyev, 2017;Muravyev et al., 2014) to consider the relationship with ownership types (Chernykh, 2008;Durnev et al., 2005;Iwasaki et al., 2017). ...
... The main corporate governance features in EEMM, and Russia in particular, are high ownership concentration and high private benefits of control resulting from weak property rights protection and underdeveloped capital markets (Enikolopov et al., 2013). Iwasaki et al. (2017) meta-analysis finds that state ownership negatively impacts firm performance in Russia, while private ownership is positively associated with firm performance. Behind nominee and foreign offshore arrangements there are ultimate controlling owners who are either the state or domestic private individuals (Chernykh, 2008). ...
... We analyze two types of blockholdersdomestic private wealthy individuals (who control private firms) and the state (who control state-affiliated entities or SOEs), as majority ownership by financial institutions and foreigners in Russian firms is very rare (Chernykh, 2008;Iwasaki et al., 2017). There are several reasons for the appointment of independent directors in private firms. ...
Emerging economies are oftentimes characterized by state capitalism, concentrated ownership and constrained resources, where firms face underinvestment due to resource misappropriation. The adoption of Anglo-American corporate governance practices may result in sub-optimal outcomes. We draw on the multiple agency perspective and research on cross-national governance to examine how independent directors, as agents with multiple roles, might mitigate blockholder appropriation. Using unique panel data from Russian publicly traded firms where the government and the business elite are predominant blockholders, we find that independent directors in private firms are less effective in mitigating blockholder appropriation than in state-owned enterprises. We further investigate board independence effects driven by the exposure to three international governance boundary conditions, namely Russian Multinational Enterprises, foreign listings of Russian firms, and foreign independent directors on Russian boards. Our study focuses on the agents that might assuage principal-principal conflicts, explores when ineffective governance can be minimized, and contributes to research on how governance practices developed in advanced economies get translated in emerging market economies.
... godine (podela na četiri kompanije). 134 Program finansijskog restrukturiranja u kompaniji Kmart u periodu od 2000. do 2003. ...
... godine (podela na četiri kompanije). 134 Program finansijskog restrukturiranja u kompaniji Kmart u periodu od 2000. do 2003. ...
The subject of the doctoral dissertation is the analysis of the bank restructuring process effects in the Republic of Serbia. Restructuring involves a variety of strategic, organizational, managerial, ownership, technological, and human resource adjustments. The main goal of the dissertation is to determine the effects of restructuring strategies in the function of growth on capital adequacy, capital, credit activity, savings, profitability and liquidity, as well as the effects of the other restructuring strategies on costs and profitability of banks in the Republic of Serbia. The research on the effects of restructuring strategies in the function of growth was conducted on a sample of banks that participated in mergers and acquisitions in the Republic of Serbia, while the research on the effects of the other restructuring strategies was conducted on a sample of banks dedicated to the development of financial technologies. In order to test the validity of research hypotheses, quantitative methods were used that include base and chain index, growth rate compared to the base and previous year and average growth rate, as well as correlation analysis to assess independent variable effects on selected dependent variables.
Based on the results of the research on the effects of bank mergers and acquisitions, there are enough arguments to confirm the hypothesis that the implementation of restructuring strategies in the function of growth has affected lending and savings growth of banks in the Republic of Serbia. Also, there are not enough arguments to confirm nor reject the hypothesis that the implementation of restructuring strategies in the function of growth has positively affected profitability and liquidity of banks. Finally, there are not enough arguments to confirm the hypothesis that the implementation of strategies in the function of growth has contributed to capital adequacy growth in analyzed banks in the Republic of Serbia.
Considering the findings of the performed research, there are enough arguments to confirm the hypothesis that the implementation of restructuring strategies in the function of growth in the Republic of Serbia has positively affected the banking sector performance. The results of the research on the effects of the other restructuring strategies showed that there are not enough arguments to confirm nor reject the hypothesis that the implementation of the other restructuring strategies has reduced costs and increased profitability in the banking sector of the Republic of Serbia.
... This confirms the pattern documented in most previous studies (see e.g. Iwasaki et al., 2018). Slightly more than 11% of the companies cross-list abroad, issuing ADRs and GDRs (variable adr). ...
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This paper studies economic effects of the gender composition of corporate boards, employing a novel longitudinal dataset of publicly traded Russian companies over 1998–2014. Using multiple identification approaches, alternative measures of gender diversity, and several performance indicators, we find some evidence that companies with gender-diverse boards have higher market values and better profitability. These effects are particularly pronounced when firms appoint several women directors, which is consistent with the critical mass theory. The effects appear to be stronger in bad economic times. Overall, we find some support to “the business case” for more women on corporate boards.
... The quality of management and transparency of ownership structure are the most important criteria for assessing the financial stability of a company (Dolgopyatova, 2017;Ivаshkovskаyа & Stepаnovа, 2011;Iwasaki, Mizobata & Muravyev, 2018). The study of the relationship between ownership structure and company performance is one of the important areas in the field of strategic management (Ciampi, 2015;Ciftci et al., 2019;Darrat et al., 2016;Demsetz & Villаlongа, 2001;Fukuda et al., 2018;Liang et al., 2016). ...
... However, the evaluation of these criteria, as a rule, is based on a questionnaire, is of an expert nature and does not establish a relationship with the possible change in financial stability indicators. Therefore, an understanding of the effects that arise at the firm level and affect their financial stability contributes to the formation of an adequate economic policy in support of enterprises and industries in order to realize the opportunities of catch-up economic growth for Russia [6,10,11]. ...
This paper identifies and analyzes the key factors of the sectoral structure of ownership, the effect of the CEO and competition between owners at the sub-sectoral level and the size of the business. Based on an example of the manufacturing and construction sectors we show a positive effect on the company’s financial stability of the share ownership of the CEO (in comparison with average sectoral share). We also show that in the case of a more uniform distribution of property between the owners, a positive effect is achieved in terms of the stability of the company. Thus, companies with a group of owner-founders are the most favorable structure for the formation of the corporate governance system in Russia.
... − low volumes of export of products of high degree of processing and prevalence of raw export. Iwasaki, Mizobata and Muravyev (Iwasaki et al., 2018) compare the behavior of enterprises in various forms of ownership in Russia. Russian economists (Gurkov et al., 2017) show that the crisis periods did not lead to a decrease in the intensity of investments by multinational corporations in Russia. ...
Research background: There has been an extensive process of foreign and joint ownership enterprises establishment in the Russian economy since 2006. Domestic manufacturing industry has been experiencing certain pressure on behalf of foreign direct investment bringing new technologies and higher labor requirements.
Purpose of the article: The aim of this paper is to investigate differences in employment strategies and labor indicators in the case of enterprises in foreign and joint ownership (FJO) and domestic enterprises in Russian ownership (RO). We analyze the manufacturing industry in Russia and its regions under conditions of stable and crisis periods.
Methods: The study enhances the analysis of Rosstat’s statistical data for 2005–2016 and applies ANOVA method to compare the employment results for companies with different ownership patterns. The research is carried out both at the national level of the Russian Federation and at the regional level according to the regions.
Findings & Value added: The study identifies significant decline in employment and in-crease in productivity for the period of 2005–2016. In contrast to the crisis of 2008–2009, in 2014–2016 there has been no sharp drop in employment. However, there is a substantial decline in real salaries which is comparable to the crisis of 2008-2009. According to ANOVA, statistically significant differences in labor indicators between FJO and RO companies are manifested. RO companies dominate in employment and payroll funds, while FJO enter-prises have better productivity results with a higher average salary. FJO companies demonstrated faster growth in employment and payroll fund in relatively stable conditions (2012–2013). However, they reacted with a significant reduction in employment for a new crisis (2014–2016), although the creation of new FJO enterprises continued in separate regions of Russia. The results can be used in social policy to regulate the employment and earnings of industrial workers in the current economic conditions.
... However, conspicuous differences between countries emerged in the length of the economic crisis, the rate of decline in output during the 2 Babecký and Campos (2011) involved a meta-analysis of 515 estimation results reported in 46 studies, while Babecky and Havranek (2014) employ 537 estimation results from 60 studies. In addition to these two papers, Fidrmuc and Korhonen (2006), Hanousek et al. (2011), Kuusk and Paas (2013), Iwasaki andTokunaga (2014, 2016), Iwasaki and Kočenda (2017), Iwasaki and Mizobata (2017), Iwasaki and Uegaki (2017), Tokunaga and Iwasaki (2017), and Iwasaki et al. (2018) present meta-studies of the transition literature. crisis period, and the speed of recovery from the crisis. ...
Immediately after the collapse of socialism, the countries of Central and Eastern Europe and the former Soviet Union fell into a serious output decline, after which they experienced a gradual recovery. Therefore, without exception, these countries followed a J-curved growth path. However, there were marked differences among them in the length and depth of the output fall and the speed of recovery. In this paper, we perform a comparative meta-analysis of the effect size and statistical significance of structural change, transformation policy, the legacy of socialism, inflation, and regional conflict in order to elucidate the mechanism that generated the J-shaped trajectory in transition economies. The meta-synthesis, which employs 3279 estimates drawn from 123 previous studies, revealed that while the growth-enhancing effects of structural change and transformation policy were small yet significant, inflation and regional conflict had a highly significant and strongly negative effect on output. In addition, the legacy of socialism might exacerbate the decline in production in the early stages of transition. The meta-regression analysis that simultaneously controls for various research conditions and the assessment of publication selection bias provides supporting evidence for the results obtained from the meta-synthesis.
... This confirms the pattern documented in most previous studies (see e.g. Iwasaki et al., 2018). Slightly more than 11% of the companies cross-list abroad, issuing ADRs and GDRs (variable adr). ...
This article studies the gender composition of corporate boards of Russian companies, including its relation to company performance. The analysis is based on a unique longitudinal dataset of virtually all Russian companies whose shares were traded on the stock market in 1998 - 2014. It shows a relatively small representation of women, just 12% of all the seats, while about 40% of the companies did not have any female director. At the same time, both the share of companies that appoint female directors and the share of female directors on boards show a clear upward trend. The econometric analysis suggests a positive link between the presence of female directors on boards and company performance, especially when firms appoint several, rather than one, female directors.
This study examines the impact of sanctions on Russian firms and the strategies these firms adopt to counter the effects of targeted sanctions. We utilize institutional theory to explain how firms shape their strategic responses as they balance the institutional pressures from their home environment vis‐à‐vis sanctioning countries. We gather longitudinal data on Russian firms that faced foreign sanctions from the start of the invasion of Crimea in 2014 until 2020. Our empirical analyses indicate that sanctions do not have a persistent negative effect on the economic performance of Russian firms. We discuss the empirical findings with the help of a series of illustrative examples of specific actions that Russian firms undertook in response to the sanctions. We conclude that while targeted sanctions create symbolic meaning in foreign relations and create financial friction for targeted firms, firms use a variety of adaptation strategies that negate the economic impact of these sanctions.
The volume of empirical research in finance exhibits a strong upward trajectory. On the one hand, the large number of research publications often produces contradictory results for the same phenomenon under examination. On the other hand, a credibility crisis calls into question the reliability of empirical research findings and the transparency of the academic research process that produces the results. Consequently, there is a need to objectively reflect and consolidate previous empirical research results and to correct biases that affect the validity of scientific evidence. Meta-analysis is a research approach that comes with this capability. Meta-analysis is a secondary research method used to synthesize existing empirical results, to detect and explain consistencies and inconsistencies among research findings, and to identify and filter out distorting effects related to publication selection and model misspecification. Although meta-analysis is a standard tool for research synthesis and evidence-based decision-making in many related research disciplines such as economics and management science, it has rarely been applied in finance. The aim of this thesis is to structurally introduce meta-analysis in finance as a complement to primary research and traditional narrative reviews by providing an objective and statistical approach to the accumulation of scientific knowledge. Chapter 2 provides a comprehensive overview of the opportunities that meta-analysis offers for finance research, recent applications of meta-analysis in finance, and the challenges and limitations associated with it. Chapter 3 presents an applied meta-analysis of 1,016 empirical effects obtained from 71 previous studies that estimate the impact of corporate financial hedging on firm value. In Chapter 4, a Monte Carlo simulation is conducted to compare the statistical properties of common weighting schemes in meta-regression analysis under the practical condition that multiple and dependent estimates are reported in the same study, which is the norm in finance. By introducing, applying, and further advancing meta-analysis in the context of finance research, this thesis aims to increase the awareness and acceptance of meta-analysis as well as to promote its future application in the field.
The thesis investigates the relationship between the ownership structure and the financial performance of publicly-listed firms in Russia. The 2015-2018 average values of market-to-book equity ratio (M/B) and return on assets (ROA) are used for evaluation of the firm’s performance. Furthermore, 2014 values for managerial and state shareholdings are employed for measuring the ownership structure of the company.
To my knowledge, no paper has examined the relationship between managerial shareholdings and performance of Russian firms both on individual firm and portfolio levels. Using single and two-stage least squares regressions, I find a statistically significant negative impact of both managerial and state shareholdings on the strategic performance (measured by M/B) of the firms. While the negative influence of state shareholdings on strategic performance is anticipated and supported by literature, the negative effect of managerial ownership is unexpected. At the same time, I conclude no impact of both managerial and state ownership on operational efficiency (measured by ROA) of the firm.
I also employ a portfolio approach to examine the relationship between state ownership and performance measured by stock returns. I compare average monthly returns and total returns across the industries and M/B. Based on the portfolio approach, I cannot conclude that publicly-listed firms without state-owners perform significantly different from state-controlled entities.
Purpose
The purpose of this paper is to investigate the specifics of the relationship between audit committee characteristics and earnings management in Russian listed companies. This research is driven by the possibility of placing this relationship within the context of a specific institutional environment for company performance.
Design/methodology/approach
The authors apply a panel study of 184 Russian listed companies for the period 2014–2018. In addition to the standard fixed effects model, the authors test the results for potential endogeneity with two-stage least squares (2SLS) analysis.
Findings
The results show that audit committee representation on the board of directors results in some mitigation of earnings management. Results reveal that a higher level of audit committee independence and the presence of financial expertise on the committee are associated with lower earnings management. However, companies with relatively busy directors on audit committees are more inclined to practice earnings management. The study’s findings hold after testing for endogeneity of audit committee independence. The authors also reveal that some audit committee characteristics (for example, audit committee independence; its level of expertise) alleviate earnings management in listed state-owned companies (SOEs) more strongly than in listed non-SOEs.
Originality/value
The results add to the ongoing debate on the role of corporate governance mechanisms in mitigating earnings management in emerging markets by taking into account the type of ownership (state-owned vs private) as a moderating variable. This study reveals, in particular, that the effect of certain audit committee characteristics on earnings management is more prominent in listed SOEs than in listed non-SOEs.
Using a total of 4,425 estimates collected from 204 previous studies, this paper presents a meta-analysis performed to compare East European EU member states, Russia and China in terms of the relationship between ownership structure and firm performance. The results indicate that, as the standard theory predicts, state ownership negatively influences the performance of firms the state invests in, while the presence of domestic outside investors and foreign investors as company owners positively affects firm performance irrespective of the difference in country/region. Furthermore, we also found that ownership of managers tends to exert a positive impact on the performance of their owned firms. Overall, however, the linkage between corporate ownership and performance is weak. This finding implies that, in comparison with advanced economies, management discipline by investors is less sufficient in emerging markets.
The article studies the relationship between ownership structure and performance of the Slovenian join stock companies, with special focus on the comparison of performance of state- and privately-owned joint stock companies and ownership concentration. The empirical analysis employs firm-level annual financial reports data and data on ownership structure of all Slovenian join stock companies for the 2005–2017 period. Using panel regression analyses we find that Slovenian state-owned joint stock companies are less profitable than their privately-owned counterparts. In contrast, we do not observe statistically significant relationship between ownership concentration and firm performance. The empirical findings point on the need of further actions in improvement of corporate governance of state-owned firms in Slovenia.
The number of empirical research studies in finance exhibits a strong upward trajectory, producing large differences in empirical results, which often impedes the drawing of consistent conclusions in relation to the phenomenon under examination. This creates demand for methods like meta-analysis that objectively consolidate and evaluate previous empirical findings. Meta-analysis is a group of statistical methods to aggregate prior empirical studies, to discover and explain consistencies as well as inconsistencies within reported results, and to detect and filter out distorting effects from publication selection or model misspecification. While meta-analysis is a standard tool for research synthesis and evidence-based decisions in many related research disciplines, like management, marketing, or economics, it has been rarely applied in finance. The goal of this article is to provide a comprehensive overview and discussion of the opportunities of meta-analytical research in finance, to present its recent applications, as well as to discuss related challenges and limitations. Thereby, we aim at increasing the awareness and acceptance of meta-analysis in finance and stimulating its future application in the field.
This paper introduces the special issue titled “Meta-Analysis of Emerging Markets and Economies” of the Emerging Markets Finance & Trade journal. In addition, it briefly describes the procedure and methodology of meta-analysis and persons who intensively perform meta-analytic research in economics. Commentary on special issue articles from the authors is also provided.
First, we specify a structural value-maximizing model of the firm, calibrate the exogenous parameters of the model to data, and show that the model and estimated productivity parameters explain the hump-shaped relation between managerial ownership and firm performance (e.g., McConnell and Servaes (1990), Morck, Shleifer, and Vishny (1988)). In addition, we assess the economic importance for firm design of structural parameters that reflect productivity of top management and physical capital. Second, we use our model and estimates to evaluate the statistical and economic relevance of the endogeneity problem and whether standard econometric approaches to endogeneity are effective. We find, in this empirical context, that the endogeneity problem is substantial and is difficult to correct using control variables, fixed effects, and simultaneous equations. Overall, our procedure provides an example of how a structural optimization-based model of the firm can isolate the important aspects of governance and quantify the economic significance of incentive mechanisms. JEL Classifications: G32, G34, L20The analysis of the relation between performance and managerial ownership represents a substantial and consistently-active segment of the empirical corporate finance literature. Important early contributions include Morck, Shleifer, and Vishny (1988), hereafter MSV, which documents
This paper uses firm-level survey data to study labor reallocation and firm growth in the transition countries over 1996–2005, including benchmarking against developed market economies. The data shows rapid growth of the new private sector and of the micro- and small-firm sectors, with the size distribution of firms moving towards the pattern observed in comparable surveys of developed market economies. Throughout, the regional patterns suggest greater convergence in the transition countries that joined the European Union in 2004 than in the other, lower-income transition economies. We also find evidence of Kuznet-Chenery type structural change across sectors.
JEL codes
L11, O12, P31.
Based on panel data from 1995-1997, the paper focuses on the impact of ownership concentration on the performance of Russian non-financial privatised companies that constitute the group of 'blue chips' of the country's stock market. We consider three indicators of company performance - labour productivity, profitability, and Tobin's Q - and employ instrumental variables technique to correct regression results for endogeneity of ownership. We find that ownership concentration positively affects labor productivity, but has a negative impact on Tobin's Q. The relationship between ownership concentration and profitability follows an U-shaped pattern with the turning point at concentration of about 56 per cent. These findings imply that ownership concentration results in higher technical efficiency of enterprises, but the benefits from productivity improvements do not accrue to all shareholders. This is consistent with expropriation hypothesis that large owners use their power to extract private benefits of control.
The authors are grateful to the French worker cooperatives federation, Confédération Générale des SCOP (CG-SCOP) for communicating the data on cooperatives and to Jean-Marie Collache and Alain Schlecht for transferring and documenting the data; and to Aurélie Charles for her excellent assistance in mounting one of the data sets. Participants in an ERMES seminar, in the IAFEP Conferences at Halifax (Canada) and Mondragon (Spain) in the European Productivity Conference in Espoo (Finland) in the Shared Capitalism session of the Academy of Management meetings at Anaheim (CA, USA) and in the ICA Research Conference at Riva del Garda (Italy) provided helpful comments on earlier versions of this work. Parts of this research were carried out while Pérotin was visiting ERMES and while Gago was visiting Leeds with funding from the Spanish government's José Castillejo Program. The mounting of one of the data sets was funded by a seedcorn grant from Leeds University Business School.
This paper reviews recent research on corporate governance, with a special focus on emerging markets. It finds that better corporate frameworks benefit firms through greater access to financing, lower cost of capital, better performance, and more favorable treatment of all stakeholders. Numerous studies show these channels to operate at the level of firms, sectors and countries - with causality increasingly often clearly identified. Evidence also shows that voluntary and market corporate governance mechanisms have less effect when a country’s governance system is weak. Importantly, how corporate governance regimes change over time and how this impacts firms are receiving more attention recently. Less evidence is available on the direct links between corporate governance and social and environmental performance. The paper concludes by identifying issues requiring further study, including the special corporate governance issues of banks, and family-owned and state-owned firms, and the nature and determinants of public and private enforcement.
Russia and other countries in the Commonwealth of Independent States that have implemented voucher privatization programs have to account for the puzzling behavior of insiders-manager-owners-who, in stripping assets from the firms they own, appear to be stealing from one pocket to fill the other. This article suggests that asset stripping and the absence of restructuring result from interactions between insiders and subnational governments in a particular property rights regime, in which the ability to realize value is limited by uncertainty and illiquidity. As the central institutions that govern the Russian economy have ceded their powers to the provinces, regional and local governments have imposed a variety of distortions on enterprises to protect local employment. To disentangle these vicious circles of control, this articles considers three sets of institutional changes: adjustments to the system of fiscal federalism by which subnational governments would be allowed to retain tax revenues generated locally; legal improvements in the protection of property rights; and the provision of mechanisms for restructuring and ownership transformation in insider-dominated firms. The aim of these reforms would be to change the incentives that local governments, owners, and investors face; to convince subnational governments that a more sustainable way of protecting employment lies in protecting local investment; to raise the cost of theft and corruption by insiders and local officials; and to allow investors to acquire controlling stakes in viable firms.
Direct bank ownership is a common practice in emerging markets. The current paper studies how bank ownership affects firm performance through corporate executive perquisites (perks) in China, a leading emerging economy. In addition to common factors known to influence the level of executive perks, we find a significantly positive link between bank ownership of company shares and executive perquisites. Further analyses suggest that higher level of executive perquisites hurt firm operating efficiency. Specifically, perks are positively associated with interest rate paid by the firms. We find some evidence consistent with the notion that the conflict of interests that banks face as both lenders and shareholders in the emerging markets induces banks to play less effective monitoring if they are concerned with the security of their loans or aim to obtain better arrangement for their loans. Our results reveal a particular mechanism through which bank ownership influences firm decisions and performance.
Immediately after the collapse of socialism, the countries of Central and Eastern Europe and the former Soviet Union fell into a serious output decline, after which they experienced a gradual recovery. Therefore, without exception, these countries followed a J-curved growth path. However, there were marked differences among them in the length and depth of the output fall and the speed of recovery. In this paper, we perform a comparative meta-analysis of the effect size and statistical significance of structural change, transformation policy, the legacy of socialism, inflation, and regional conflict in order to elucidate the mechanism that generated the J-shaped trajectory in transition economies. The meta-synthesis, which employs 3279 estimates drawn from 123 previous studies, revealed that while the growth-enhancing effects of structural change and transformation policy were small yet significant, inflation and regional conflict had a highly significant and strongly negative effect on output. In addition, the legacy of socialism might exacerbate the decline in production in the early stages of transition. The meta-regression analysis that simultaneously controls for various research conditions and the assessment of publication selection bias provides supporting evidence for the results obtained from the meta-synthesis.
This paper aims to perform a large-scale meta-analysis of the relationship between post-privatization ownership and firm performance in Central and Eastern Europe and the former Soviet Union. Baseline estimation of a meta-regression model that employs a total of 2,894 estimates drawn from 121 previous studies indicated the superior impact of foreign ownership on firm performance in comparison with state and domestic private entities. Furthermore, the estimation of an extended meta-regression model that explicitly controls for the idiosyncrasies of transition economies and privatization policies strongly suggested that differences between countries in location, privatization method, and speed of policy implementation strongly influence the link between post-privatization ownership structure and firm performance. We also found that these factors not only cause a remarkable gap between countries in terms of ex post improvement in firm performance but also significantly affect the interrelationship between foreign investors, domestic outsider owners, and firm managers, and the relative superiority of various domestic outsiders. Conclusive evidence of the harm caused to ex post firm performance by voucher privatization is one of the most noteworthy empirical findings in this paper.
We use a total of 1171 estimates extracted from 34 previous studies and perform a meta-analysis to examine the relationship between ownership structures and firm performance in Czech mass-privatized firms. We find that, in contrast to the remarkable effect of foreign ownership on firm performance and restructuring activities, domestic private entities were incapable of outperforming the state as owners of Czech companies. Our assessment of publication selection bias, however, indicates that the collected estimates do not contain genuine evidence for many types of corporate ownership. Further development and improvement in this study area are necessary to capture the true effect. Finally, we also point out the importance to draw (meta-analysis) inferences based on studies that employ adequate methodology.
This book is designed to scrutinize the Russian business sector in transition with special attention to firm organization, business integration, corporate governance, and company management. Using a unique dataset of Russian joint-stock companies, the authors empirically analyze key issues for understanding the Russian corporate sector. © Tatiana Dolgopyatova, Ichiro Iwasaki and Andrei A. Yakovlev 2009. All rights reserved.
This article empirically examines the effect of central bank independence (CBI) on inflation by means of a comparative meta-analysis of studies of transition economies and of other developed and developing economies. The results of a meta-synthesis indicate that both transition and nontransition studies have successfully identified a negative relationship between CBI and inflation. Moreover, the present meta-regression analysis suggests that a series of study conditions strongly affected the empirical results concerning transition economies. The article also finds that no significant difference exists between the two types of studies in terms of either effect size or statistical significance.
We analyze related party transactions between Chinese publicly listed firms and their state-owned shareholders to examine whether companies benefit or lose from the presence of government shareholders and politically connected directors. Minority shareholders seem to be expropriated in firms controlled by local governments, firms with a large proportion of local government directors on their board, firms without central government directors, and firms in provinces where local government bureaucrats are less likely to be prosecuted for corruption. In contrast, firms controlled by the central government (or having central government affiliated directors), benefit in related party transactions with their government parents. Copyright 2010, Oxford University Press.
We study shock-based methods for credible causal inference in corporate finance research. We focus on corporate governance research, survey 13,461 papers published between 2001 and 2011 in 22 major accounting, economics, finance, law, and management journals; and identify 863 empirical studies in which corporate governance is associated with firm value or other characteristics. We classify the methods used in these studies and assess whether they support a causal link between corporate governance and firm value or another outcome. Only a small minority have convincing causal inference strategies. The convincing strategies largely rely on external shocks – usually from legal rules – to generate natural experiments. We examine the 75 shock-based papers and provide a guide to shock-based research design, which stresses the common features across different designs and the value of using combined designs.
In this paper, we conduct a meta-analysis of studies that empirically examine the relationship between economic transformation and foreign direct investment (FDI) performance in Central and Eastern Europe and the former Soviet Union over the past quarter century. More specifically, we synthesise the empirical evidence reported in previous studies that deal with the determinants of FDI in transition economies, focusing on the impacts of transition factors. We also perform meta-regression analysis to specify determinant factors of the heterogeneity among the relevant studies and the presence of publication-selection bias. We find that the existing literature reports a statistically significant non-zero effect as a whole, and a genuine effect is confirmed for some FDI determinants beyond the publication-selection bias.
In this paper, we conduct a meta-analysis of the literature that empirically examines the microeconomic impacts of foreign direct investment (FDI) in Central and Eastern Europe and the former Soviet Union. The meta-synthesis of estimates collected from relevant studies shows that both the effect size and the statistical significance of the indirect effect of FDI, namely the productivity spillover effect, are obviously lower than those of the direct effect caused by foreign participation in company management through ownership. Moreover, the meta-regression analysis reveals that, probably due to the presence of publication selection bias, previous studies have not yet provided empirical evidence of a non-zero productivity spillover effect in the region. Further research efforts are required to capture the true effect.
The purpose of this book is to introduce novice researchers to the tools of meta-analysis and meta-regression analysis and to summarize the state of the art for existing practitioners. Meta-regression analysis addresses the rising "Tower of Babel" that current economics and business research has become. Meta-analysis is the statistical analysis of previously published, or reported, research findings on a given hypothesis, empirical effect, phenomenon, or policy intervention. It is a systematic review of all the relevant scientific knowledge on a specific subject and is an essential part of the evidence-based practice movement in medicine, education and the social sciences. However, research in economics and business is often fundamentally different from what is found in the sciences and thereby requires different methods for its synthesis-meta-regression analysis. This book develops, summarizes, and applies these meta-analytic methods. © T.D. Stanley and Hristos Doucouliagos 2012. All rights reserved.
This paper examines whether institutional investors exhibit preferences for near-term earnings over long-run value and whether such preferences have implications for firms' stock prices. First, I find that the level of ownership by institutions with short investment horizons (e.g., "transient" institutions) and by institutions held to stringent fiduciary standards (e.g., banks) is positively (negatively) associated with the amount of firm value in expected near-term (long-term) earnings. This evidence raises the question of whether such institutions myopically price firms, overweighting short-term earnings potential and underweighting long-term earnings potential. Evidence of such myopic pricing would establish a link through which institutional investors could pressure managers into a short-term focus. The results provide no evidence that high levels of ownership by banks translate into myopic mispricing. However, high levels of transient ownership are associated with an over- (under-) weighting of near-term (long-term) expected earnings, and a trading strategy based on this finding generates significant abnormal returns. This finding supports the concerns that many corporate managers have about the adverse effects of an ownership base dominated by short-term-focused institutional investors.
In this paper we draw on recent progress in the theory of (1) property rights, (2) agency, and (3) finance to develop a theory of ownership structure for the firm.1 In addition to tying together elements of the theory of each of these three areas, our analysis casts new light on and has implications for a variety of issues in the professional and popular literature, such as the definition of the firm, the “separation of ownership and control,” the “social responsibility” of business, the definition of a “corporate objective function,” the determination of an optimal capital structure, the specification of the content of credit agreements, the theory of organizations, and the supply side of the completeness-of-markets problem.
This chapter discusses how applied researchers in corporate finance can address endogeneity concerns. We begin by reviewing the sources of endogeneity-omitted variables, simultaneity, and measurement error-and their implications for inference. We then discuss in detail a number of econometric techniques aimed at addressing endogeneity problems, including instrumental variables, difference-in-differences estimators, regression discontinuity design, matching methods, panel data methods, and higher order moments estimators. The unifying themes of our discussion are the emphasis on intuition and the applications to corporate finance.
This paper examines the value of government ownership in Europe during the global financial crisis. This crisis was an exogenous shock for European firms, which allows us to observe an out-of-equilibrium effect on the costs and benefits of government ownership. Using a comprehensive sample of 4,737 listed firms in 28 European countries over the period 2005–2009, we find that firms with government ownership experienced a smaller reduction in firm value than firms without government ownership. This effect was driven by firms located in countries where the risk of expropriation by the government is lower, that is, countries with less corruption and better investor protection.
This paper provides an insight into the realm of financial contagion, and applies a meta-analytical approach to focus on Central and Eastern European (CEE) economies. Our results show that, on average, asset market correlations have increased, albeit moderately, during turbulent periods as compared to more tranquil times. The selected financial crises are found to vary in terms of their contagiousness. Interestingly, the level of development in a given country is not shown to significantly influence the susceptibility to contagion. Our testing of CEE transition economies indicates that, relative to the sample average, they are less susceptible to financial contagion. An interesting finding relating to CEE transition countries is that they seem to have been affected mostly by crises originating in the United States, even though we have also considered crises originating in Russia and the Czech Republic in the sample.
This article uses a quasi-experimental framework provided by recent changes in Russian corporate law to study the effect of
investor protection on the value of shares. The legal change analyzed involves the empowerment of nonvoting shareholders to
veto unfavorable changes to their class rights. We take advantage of the presence of well-defined treatment and control groups
and use the voting premium, a traditional measure of private benefits of control and shareholder expropriation, as the outcome
variable. Based on a novel hand-collected dataset of dual-class stock companies in Russia and using a difference-in-difference
regression analysis as well as an event study, we find a statistically and economically significant effect of improved protection
of preferred shareholders on the value of their shares. The result is robust to several changes in the empirical specification.
(JEL G30, G38, K22)
The privatisation processes in eastern europe created ownership structures that were very different from those observed in developed Western economies. The widespread application of employee ownership in privatisation is a particularly fascinating case (Uvalic & Vaughan-Whitehead, 1997a; EBRD, 1998). The expectation of many observers was that employee ownership would prove to be temporary and a rapid convergence to more familiar ownership structures would take place (Boycko et al., 1995; Blanchard & Aghion, 1996). Subsequent evidence has partly confirmed the transience hypothesis, since the number of employee-owned enterprises was found to decline rapidly (Estrin & Wright, 1999; Jones & Mygind, 1999a). However, relatively little is known on how and for what reasons the decline is taking place. This article analyses these questions using empirical data from Estonia.
In this paper, we conduct a meta-analysis of the literature that empirically examines the impact of foreign direct investment (FDI) on economic growth in Central and Eastern Europe and the former Soviet Union. We found that existing studies indicate a growth-enhancing effect of FDI in the region as a whole. The results of our meta-regression analysis suggest that the effect size and statistical significance of the reported estimates strongly depend on study conditions. We also found that the relevant studies fail to present genuine evidence of a non-zero FDI effect. More research is necessary to identify the true effect.
The unique natural experiment of the fall of the iron curtain led to large institutional and governance differences across countries. This allows us to observe the evolution of ownership and control after an initial shock. We utilize this cross-time/cross-country variation in institutions and privatization methods to analyze the determinants and effects of individual investor control in a large sample of firms in 11 CEE countries over the period 2000 - 2007. Controlling for possible endogeneity and firm effects, we find that large individual investors add value to the firms they control. They do so predominantly compared to state controlled firms but also compared to other privately controlled firms. If large individual investor firms employ professional managers and (only) supervise them actively, they achieve the better performance improvements in Tobin’ q than the firms managed by their controlling shareholders. Concerning the determinants of ownership, large individual shareholders substitute for missing good country governance institutions, and ownership is very sticky, since initial conditions (privatization methods) still matter. It appears that secondary markets do not converge on the same ownership equilibria as primary markets do.
The present fiscal difficulties of many countries amplify the call for structural reforms. To provide stylized facts on how reforms worked in the past, we quantitatively review 60 studies estimating the relationship between reforms and growth. These studies examine structural reforms carried out in 26 transition countries around the world. Our results show that an average reform caused substantial costs in the short run, but had strong positive effects on long-run growth. Reforms focused on external liberalization proved to be more beneficial than others in both the short and long run. The findings hold even after correction for publication bias and misspecifications present in some primary studies.
Using panel data on 275 German exchange-listed companies I examine the relationship between founding-family ownership and firm performance. By separating the family effect from general blockholder effects, the paper shows that family firms are not only more profitable than widely-held firms but also outperform companies with other types of blockholders. However, the performance of family businesses is only better in firms in which the founding-family is still active either on the executive or the supervisory board. These findings suggest that family ownership is related to superior firm performance only under certain conditions. If families are just large shareholders without board representation, the performance of their companies is not distinguishable from other firms. In addition, the results indicate that other blockholders either affect firm performance adversely or have no detectable influence on performance measures.
We adopt a multi-theoretic approach to investigate a previously unexplored phenomenon in extant literature, namely the differential impact of foreign institutional and foreign corporate shareholders on the performance of emerging market firms. We show that the previously documented positive effect of foreign ownership on firm performance is substantially attributable to foreign corporations that have, on average, larger shareholding, higher commitment and longer-term involvement. We document the positive influence of corporations vis a vis financial institutions with respect to domestic shareholdings as well. We also find an interesting dichotomy in the impact of these shareholders depending on the business group affiliation of firms.
This chapter discusses how applied researchers in corporate finance can address endogeneity concerns. We begin by reviewing the sources of endogeneity - omitted variables, simultaneity, and measurement error - and their implications for inference. We then discuss in detail a number of econometric techniques aimed at addressing endogeneity problems including: instrumental variables, difference-in-differences estimators, regression discontinuity design, matching methods, panel data methods, and higher order moments estimators. The unifying themes of our discussion are the emphasis on intuition and the applications to corporate finance.
This study tests alternative hypotheses about firm-level determinants of the government incentives to acquire controlling stakes in private companies. Using a novel hand-collected dataset of 153 largest listed and unlisted Russian companies, I investigate the economic and political rationale of a 2004-2008 wave of selected nationalizations and provide new evidence on the methods and characteristics of such takeovers in a post-privatization emerging market. I find that formerly privatized companies in strategically important sectors face the highest risks of corporate control transfers from private to state hands. I also find that contrary to commonly held beliefs, there is little evidence that renationalizations in Russia are driven by economic factors: the government neither systematically “cherry-picks” best performers nor addresses market failures by rescuing underperformers. These results contribute to the politics and finance literature by providing new firm-level evidence on the importance of political rationale in the government’s decision to intervene into the corporate control structures.
We examine the relationship between the degree of foreign ownership and performance of recipient firms, using of panel of 21,582 Chinese firms over the period 2000-2005. We find that joint-ventures perform better than wholly foreign owned and purely domestic firms. Although productivity and profitability initially rise with foreign ownership, they start declining once foreign ownership reaches beyond 64%. This suggests that some domestic ownership is necessary to ensure optimal performance. We rationalize these findings with a model of a joint-venture, where strategic interactions between a foreign and a domestic owner’s inputs may lead to an inverse U-shaped ownership-performance relationship.
This paper examines whether institutional investors exhibit preferences for near-term earnings over long-run value and whether such preferences have implications for firms' stock prices. First, I find that the level of ownership by institutions with short investment horizons (e.g., “transient” institutions) and by institutions held to stringent fiduciary standards (e.g., banks) is positively (negatively) associated with the amount of firm value in expected nearterm (long-term) earnings. This evidence raises the question of whether such institutions myopically price firms, overweighting short-term earnings potential and underweighting long-term earnings potential. Evidence of such myopic pricing would establish a link through which institutional investors could pressure managers into a short-term focus. The results provide no evidence that high levels of ownership by banks translate into myopic mispricing. However, high levels of transient ownership are associated with an over- (under-) weighting of near-term (long-term) expected earnings, and a trading strategy based on this finding generates significant abnormal returns. This finding supports the concerns that many corporate managers have about the adverse effects of an ownership base dominated by short-term-focused institutional investors.
We use a large data set of Russian manufacturing firms to describe the ownership structure in the Russian industry at the end of the mass privatization program in 1994 and its subsequent evolution. The data shows a high, but gradually decreasing ownership stakes of firm insiders (managers and workers). We estimate the effect of a wide range of firm characteristics on the decision to privatize, the initial ownership structure after privatization, and on subsequent changes of ownership stakes. We test and find support for several predictions of the model by Aghion and Blanchard (1998). For example, collusion among workers makes them more reluctant to sell shares to outsiders. Firms in financial distress show a higher incidence of insiders selecting the option of privatization leading to high insider ownership. This can be explained by their desire to insure against unemployment in the case of restructuring by outsiders. No evidence is found of a sequencing in privatization according to the performance of firms before privatization. A methodological novelty of this paper is the application of a tobit model with sample selection to the choice of ownership stakes.
We review a large body of literature dealing with the effects of Foreign Direct Investment (FDI) on economies during their transformation from a command economic system toward a market system. We report the results of a meta-analysis based on the literature on externalities from FDI. The studies on emerging European markets covered in our survey report direct and indirect FDI effects weakening over time, similarly as in other FDI destination countries. This is imputable to a publication bias that is detected and to the fact that more sophisticated methods and more controls can be used once a sufficient time span is available. Panel studies are likely to find relatively lower spillover effects. The choice of the research design (definition of firm performance and foreign firm presence) matters. More specific to the sampled studies is the role played by forward and backward spillovers which dominate other channels in driving FDI externalities.
There is still an intense controversy about the empirical support for the effects of structural reforms on economic growth. This paper uses data from 46 studies and more than 500 estimates to: (a) document the variation in these estimated effects and (b) identify the main factors that help explain it. We put forward evidence, based on the general-to-specific method, suggesting that the estimated long-run effects of reform on growth are normally distributed, and that accounting for institutions and initial conditions (trade liberalization) are principal factors in decreasing (increasing) the probability of reporting significant and positive effects of reform on growth.
This paper presents a parsimonious, structural model that isolates primary economic determinants of the level and dispersion of managerial ownership, firm scale, and performance and the empirical associations among them. In particular, variation across firms and through time of estimated productivity parameters for physical assets and managerial input and corresponding variation in optimal compensation contract and firm size combine to deliver the well-known hump-shaped relation between Tobin's Q and managerial ownership. To assess the effectiveness of standard econometric approaches to the endogeneity problem, we apply those remedies to panel data generated from the model. The unfortunate conclusion is that, at least in the ownership-performance context, proxy variables, fixed effects, and instrumental variables do not generally provide reliable solutions to simultaneity bias.
I investigate ultimate control and ownership patterns in Russian publicly traded companies. I show that these companies are controlled either by the state or by anonymous private owners. Federal and regional governments’ control is exercised through extensive use of pyramids. Private owners widely exploit legal loopholes that allow them to mask their holdings and identities through nominee and foreign offshore arrangements. The comparison of formal and informal ownership disclosure reveals that the typical anonymous owners are insiders and that in virtually all cases the market participants “know” who the real owners are. Collectively, the evidence suggests that the legal weaknesses in disclosure requirements are important determinants of country-specific ownership and control structures.
We review the literature on business cycle correlation between the euro area and the Central and Eastern European countries (CEECs), a topic that has gained attention as the newest EU members approach monetary union. Our meta-analysis of 35 identified publications suggests that some CEECs already have comparably high correlation with the euro area business cycle. We find that estimation methodologies can have a significant effect on correlation coefficients. While CEEC central bankers tend to be more conservative in their estimates than academics or eurosystem researchers, we find no evidence of a geographical bias in the studies. Journal of Comparative Economics34 (3) (2006) 518–537.
This paper examines the relation between institutional investor involvement in and the operating performance of large firms. We find a significant relation between a firm’s operating cash flow returns and both the percent of institutional stock ownership and the number of institutional stockholders. However, this relation is found only for a subset of institutional investors: those less likely to have a business relationship with the firm. These results suggest that institutional investors with potential business relations with the firms in which they invest are compromised as monitors of the firm.
This paper integrates elements from the theory of agency, the theory of property rights and the theory of finance to develop a theory of the ownership structure of the firm. We define the concept of agency costs, show its relationship to the ‘separation and control’ issue, investigate the nature of the agency costs generated by the existence of debt and outside equity, demonstrate who bears these costs and why, and investigate the Pareto optimality of their existence. We also provide a new definition of the firm, and show how our analysis of the factors influencing the creation and issuance of debt and equity claims is a special case of the supply side of the completeness of markets problem.The directors of such [joint-stock] companies, however, being the managers rather of other people's money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master's honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company.Adam Smith, The Wealth of Nations, 1776, Cannan Edition(Modern Library, New York, 1937) p. 700.
The relationship between ownership structure and corporate performance has been the subject of intense research in both transition and market economies. The Czech Republic's mass-privatization program provides an unique opportunity to investigate this relationship. It changed the ownership of firms in a short period of time, and firm characteristics had only a limited influence on the resulting ownership structure. For a cross section of 706 Czech firms over the period 1992 through 1997, we find that the more concentrated the ownership, the higher the firm profitability and labor productivity. These findings are weakly robust to the inclusion of control variables for the type of ownership, or to a correction for the endogeneity of ownership concentration.J. Comp. Econom., September 1999, 27(3), pp. 498–513. World Bank, 1818 H Street NW, Washington, DC 20433.
We investigate the relationship between management ownership and market valuation of the firm, as measured by Tobin's Q. In a 1980 cross-section of 371 Fortune 500 firms, we find evidence of a significant nonmonotonic relationship. Tobin's Q first increases, then declines, and finally rises slightly as ownership by the board of directors rises. For older firms, there is evidence that Q is lower when the firm is run by a member of the founding family than when it is run by an officer unrelated to the founder.