The link between ownership structure and firm performance Evidence from Sweden’s listed companies

Abstract

This thesis explores the link between ownership structure and firm performance among Sweden’s listed companies. The data collected for this research is for the period 1999-2003 and the sample consists of 87 companies. Five specific research questions are applied to explore the relationships between the vote fraction held by controlling owner/owners and performance and vote differentiation and performance. The performance measures applied are stock return, ROA, ROE and Tobin’s Q. The results indicate that companies with a dispersed ownership structure, meaning the largest owner holds less than 20% of total votes, are associated with worse performance regarding stock return, ROA and ROE, but are highly valued relating to Tobin’s Q. We present evidence that the relationship between vote concentration and performance may be spurious. When considering endogeneity and firm heterogeneity, firm specific factors, industry effect and categorization of the controlling owner seem to play vital role. Further our research shows that the relationships between vote concentration and performance vanish, when considering other vote owners exceeding different thresholds (5, 10 and 20%). In line with previous research vote differentiation does not affect firm performance. Instead risk and size of the company are decisive in the extent to which companies apply vote differentiation tools.