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Article
Publication date: 18 September 2017

Maria Aluchna and Bogumil Kaminski

The purpose of this paper is to investigate the links between company ownership structure and financial performance in the context of the largest Central European stock…

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Abstract

Purpose

The purpose of this paper is to investigate the links between company ownership structure and financial performance in the context of the largest Central European stock market. Using the framework of agency theory, the authors address the question of the expropriation effect by dominant owners and the effect of collusion between shareholders of different types on company performance.

Design/methodology/approach

The authors test hypotheses on the relations between ownership concentration and the involvement of different shareholders (state, CEO, industry and financial investors) vs return on assets (ROA). The authors adopt the panel model controlling for endogeneity and sector of operation and analyze the data from the unique sample of 495 Polish non-financial firms listed on the Warsaw Stock Exchange in years 2005-2014 with a total of 3,203 observations.

Findings

The authors identify a negative correlation between ownership concentration by the majority shareholder and ROA, which corresponds with the expropriation rationale of blockholders. The authors also observe negative effects due to ownership concentration by the second largest shareholder, supporting the notion of collusion. The results show that ownership by industry investors is associated with a higher ROA. Ownership by the CEO, state and financial investors proves to have no statistically significant effect on performance.

Originality/value

The paper further develops the nature of ownership-performance relations in the specific economic context of a post-transition, emerging European stock market, weak external corporate governance mechanisms, insufficient investor protection and significant concentration of share ownership. The results add to the understanding of monitoring vs expropriation effects by large owners and the collusion between different types of shareholders.

Details

Baltic Journal of Management, vol. 12 no. 4
Type: Research Article
ISSN: 1746-5265

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Article
Publication date: 13 July 2020

Maria Aluchna, Jyoti Devi Mahadeo and Bogumił Kamiński

The purpose of the paper is to advance the understanding of the links between the presence of independent directors (IDs) on boards and the company value in the specific…

Abstract

Purpose

The purpose of the paper is to advance the understanding of the links between the presence of independent directors (IDs) on boards and the company value in the specific context of concentrated ownership. The authors apply the framework of agency theory to identify the monitoring effect of IDs in two legal systems – common law and civil law.

Design/methodology/approach

The authors test formulated hypotheses using a unique sample of 50 Mauritian and Polish companies listed during the years 2007 to 2015, amounting to a total of 394 observations adopting the fixed effect panel model.

Findings

The results of the panel model show a negative relationship between independent directors on boards and company value. Specifically, the effect remains negative for companies operating in the civil law system, whereas the stronger protection offered by common law offsets the effect of concentrated ownership, resulting in a non-correlation between independent directors on board and firm value.

Originality/value

This study expands the understanding of the value added by independent directors, addressing their monitoring role in the unfavorable context of concentrated ownership. It also reveals that different legal frameworks of civil law and common law may impact the monitoring performed by independent directors.

Details

Corporate Governance: The International Journal of Business in Society, vol. 20 no. 6
Type: Research Article
ISSN: 1472-0701

Keywords

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