Pyramidal Ownership and Company Value: Evidence from Polish Listed Companies

• Autorzy: Maria Aluchna , Tomasz Kuszewski
• Języki publikacji: EN

Abstrakty

EN

This paper examines the effects of pyramidal ownership. Using the sample of 162 non-financial companies listed on the Warsaw Stock Exchange during the period 2010-2014, we verify the relation between the adoption of a pyramidal structure and company value. Specifically, we show that the link between pyramidal ownership and company value is more complex than previously thought addressing the aspect of ownership concentration and dual class shares. Our results indicate that the use of pyramids is associated with a higher value measured by Tobin's Q, supporting the efficient monitoring hypothesis. Contrary to our expectations the combination of pyramidal ownership and dual class shares is correlated with lower Q. Finally, while the adoption of a pyramid by a majority shareholder does not impact firm value, the combination of a pyramid, ownership concentration and dual class shares is associated with higher Q. This finding suggests that the blockholder ownership outweighs the possible cost of excessive disproportionate ownership and that pyramids and dual class shares have different effects on company value. (original abstract)

Słowa kluczowe

EN

Ownership; Enterprise value

PL

Prawo własności; Wartość przedsiębiorstwa

• Czasopismo: Contemporary Economics
• Rocznik: 2021
• Tom: 15
• Numer: nr 4
• Strony: 479--498

Twórcy

autor

Maria Aluchna

• SGH Warsaw School of Economics

autor

Tomasz Kuszewski

• University of Economics and Human Sciences in Warsaw, Poland

Bibliografia

• Adams, R., & Ferreira, D. (2008). One share-one vote: The empirical evidence. Review of Finance, 12(1), 51-91. https://doi.org/10.1093/rof/rfn003
• Aldrighi, D.M., Postali, F.A., & Diaz, M.D. (2018). Corporate governance and pyramidal ownership: The role of Novo Mercado. Revista Brasileira Finanças, 16(1), 5-38. https://doi.org/10.12660/rbfin.v16n1.2018.72020
• Almeida, H., & Wolfenzon, D. (2006). A theory of pyramidal ownership and family business groups. Journal of Finance, 61(6), 2637-2680. https://doi.org/10.1111/j.1540-6261.2006.01001.x
• Almeida, H., Park, S.Y., & Subrahmanyam, M., Wolfenzon, D. (2011). The structure and formation of business groups: Evidence from Korean chaebols. Journal of Financial Economics, 99(2), 447-475. https://doi.org/10.1016/j.jfineco.2010.08.017
• Amoako-Adu, B., & Smith B.F. (2001). Dual class firms: Capitalization, ownership structure and recapitalization back into single class. Journal of Banking and Finance, 25(6), 1083-1111. https://doi.org/10.1016/S0378-4266(00)00107-2
• Atavasov, V., Black, B., & Ciccotello C. (2011). Law and tunneling. Journal of Corporation Law, 37, 1-49.
• Attig, N, Fischer, K., & Galdhoum J. (2004). On the determinants of pyramidal ownership: evidence on dilution of minority interests. EFA 2004 Maastricht Meetings Paper No. 4592.
• Bae, K. H., & Jeong, S. W. (2007). The value-relevance of earnings and book value, ownership structure and business groups affiliation: Evidence from Korean business groups. Journal of Business, Finance and Accounting, 34(5-6), 740-766. https://doi.org/10.1111/j.1468-5957.2007.02017.x
• Baek, J.-S., Kang, J.-K., & Park, K.-S. (2004). Corporate governance and firm value: Evidence from the Korean financial crisis. Journal of Financial Economics, 71(2), 265-313. https://doi.org/10.1016/S0304-405X(03)00167-3
• Bank, S., & Cheffins, B. (2010). The corporate pyramid fable. Business History Review, 84(3), 435-458. https://doi.org/10.1017/S0007680500002191
• Bany-Ariffin, A., Nor F., & McGowan, C. (2010). Pyramidal structure, firm capital structure exploitation and ultimate owners' dominance. International Review of Financial Analysis, 19(3), 151-164. https://doi.org/10.1016/j.irfa.2010.03.002
• Bedo, Z., & Acs, B. (2007). The impact of ownership concentration, and identity on company performance in the US and in Central and Eastern Europe. Baltic Journal of Management, 2(2), 125-139. https://doi.org/10.1108/17465260710750955
• Bena, J., & Ortiz-Molina, H. (2013). Pyramidal ownership and the creation of new firms. Journal of Financial Economics, 108(3), 798-821. https://doi.org/10.1016/j.jfineco.2013.01.009
• Bennedsen, M., & Nielsen, K. (2010). Incentive and entrenchment effects in European ownership. Journal of Banking and Finance, 34(9), 2212-2229. https://doi.org/10.1016/j.jbankfin.2010.02.007
• Boubaker, S. (2007). Ownership-control discrepancy and firm value: Evidence from France. Multinational Finance Journal, 11(3,4), 211-252. https://doi.org/10.2139/ssrn.740756
• Bozec, Y., Bozec, R., & Dia, M. (2010). Overall governance, firm value and deviation from one share-one vote principle. International Journal of Managerial Finance, 6(4),305-328. https://doi.org/10.1108/17439131011074468
• Brüderl, J. (2015). Applied panel data analysis using Stata, Panel Analysis, Ludwig-Maximilians Universität München.
• Buchuk, D., Larrain, B., Prem, M., & Infante F. (2020). How do internal capital markets work? Evidence from the great recession. Review of Finance, 24(4), 847-889. https://doi.org/10.1093/rof/rfz022
• Buchuk, D., Larrain, F., Muñoz F., & Urzúa F. (2014). The internal capital markets of business groups: Evidence from intra-group loans. Journal of Financial Economics, 112 (2), 190-212. https://doi.org/10.1016/j.jfineco.2014.01.003
• Cameron, A., & Trivedi, P. (2005). Microeconometrics. Methods and applications, Cambridge University Press.
• Choi, D., Choi, S., Gam, J.K., & Shin, H. (2021). R&D investment decisions in business groups: Evidence from a natural experiment. Corporate Governance International Review, 1-25, https://doi.org/10.1111/corg.12407
• Claessens, S., Diankov, S., & Lang, H. (2000). The separation of ownership and control in East Asian corporation. Journal of Finance, 58(1-2), 81-112. https://doi.org/10.1016/S0304-405X(00)00067-2
• Claessens, S., Diankov, S., Fan, J., & Lang, H. (2002). Disentangling the incentive and entrenchment effects of large shareholdings. Journal of Finance, 57(6), 2741-2771. https://doi.org/10.1111/1540-6261.00511
• Cornett, M., Marcus, A., & Saunders, A. (2007). The impact of institutional ownership on corporate operating performance. Journal of Banking and Finance, 31(6), 1771-1794. https://doi.org/10.1016/j.jbankfin.2006.08.006
• Cronqvist, H., & Nilsson, M. (2003). Agency costs of controlling minority shareholders. Journal of Financial and Quantitative Analysis, 38(4), 695-719. https://doi.org/10.2307/4126740
• De Angelo, H., & De Angelo, L. (1985). Managerial ownership of voting rights: A study of public corporations with dual classes of common stock. Journal of Financial Economics, 14(1), 33-69. https://doi.org/10.1016/0304-405X(85)90043-1
• Demsetz H., & Lehn K. (1985). The structure of corporate ownership: Causes and consequences. Journal of Political Economy, 93(6), 1155-1177. https://doi.org/10.1086/261354
• Djebali, R., & Belanès, A. (2015). On the impact of family versus institutional blockholders on dividend policy. Journal of Applied Business Research, 31(4), 1329-1342. https://doi.org/10.19030/jabr.v31i4.9320
• Espinoza-Méndez, Ch., Jara-Bertín, M., & Maquiera C. (2018). The influence of family and pyramidal ownership on corporate diversification in Chile. The North American Journal of Economics and Finance, 43, 158-168. https://doi.org/10.1016/j.najef.2017.10.012
• Faccio, M., & Lang L. (2002). The ultimate ownership of Western European corporations. Journal of Financial Economics, 65(3), 365-395. https://doi.org/10.1016/S0304-405X(02)00146-0
• Florackis, C., A. Kanas, & Kostakis A. (2015). Dividend policy, managerial ownership and debt financing: A non-parametric perspective. European Journal of Operational Research, 214(3), 783-795. https://doi.org/10.1016/j.ejor.2014.08.031
• Gama, M. A. B., & Bandeira-de-Mello, R. (2021). The effect of affiliation structure on the performance of pyramidal business groups. Journal of Business Research, 124, 24-37. https://doi.org/10.1016/j.jbusres.2020.11.041
• Gilson, R., & Schwarz, A. (2013). Contracting about private benefits of control. Columbia Law and Economics Research Paper no. 436. https://law.stanford.edu/wp-content/uploads/sites/default/files/publication/359494/doc/slspublic/ssrn-id2182781.pdf
• Gonenc, H., Kan, O., & Karadagli E. (2007). Business groups and internal capital market. Emerging Markets, Finance and Trade, 43(2), 63-81. https://doi.org/10.2753/REE1540-496X430204
• Han Kim, E., & Kim, W. (2008). Changes in Korean corporate governance: A response to crisis. Journal of Applied Corporate Finance, 20(1), 47-58. https://doi.org/10.7312/chew14854-010
• Hardi, P., & Buti, K. (2012). Corporate governance variables: Lessons from a holistic approach to Central-Eastern European practice. Corporate Governance, 12(1), 101-117. https://doi.org/10.1108/14720701211191364
• Holmén M., & Högfeldt P. (2005). Pyramidal discounts: Tunneling or agency costs? Finance Working Paper, no. 73, European Corporate Governance Institute.
• Holmén, M., & Högfeldt, P. (2009). Pyramidal discounts: Tunneling or overinvestment? International Review of Finance, 9(1-2), 133-175. https://doi.org/10.1111/j.1468-2443.2009.01088.x
• Holmén, M., & Nivorozhkin, E. (2007). The impact of family ownership and dual class shares on takeover risk. Applied Financial Economics, 17(10), 785-804. https://doi.org/10.1080/09603100500461694
• Hussain, H., Ali, A., Thaker H., & Ali, M. (2019). Firm performance and family related directors: Empirical evidence from an emerging market. Contemporary Economics, 13(2), 187-204. https://doi.org/10.5709/ce.1897-9254.307
• Jara-Bertin, M., López-Iturriaga, F., & López-de-Foronda O. (2008). The contest to the control in European family firms: How other shareholders affect firm value. Corporate Governance: An International Review, 16(3), 146-159. https://doi.org/10.1111/j.1467-8683.2008.00677.x
• Khanna, T., & Palepu, K. (2000). Is group affiliation profitable in emerging markets? An analysis of diversified Indian business groups. Journal of Finance, 55(2), 867-891. https://doi.org/10.1111/0022-1082.00229
• Khanna, T., & Rivkin, J. (2001). Estimating the performance effects on business groups in emerging markets. Strategic Management Journal, 22(1), 45-74. https://doi.org/10.1002/1097-0266(200101)22:1<45::AID-SMJ147>3.0.CO;2-F
• Koop, G. (2008). Introduction to Econometrics. Wiley & Sons Ltd.
• La Porta, R., Lopez-de-Silanes F., & Shleifer, A. (1999). Corporate ownership around the world. Journal of Finance, 54(2), 471-517. https://doi.org/10.1111/0022-1082.00115
• Lemmon, M., & Lins K. (2003). Ownership structure, corporate governance, and firm value: Evidence from the East Asian Financial crisis. Journal of Finance, 58(4), 1445-1468. https://doi.org/10.1111/1540-6261.00573
• Lin, J. J., & Yeh, Y-H. (2020). Internal capital markets, ownership structure, and investment efficiency: Evidence from Taiwanese business groups. Pacific-Basin Finance Journal, 60. https://doi.org/10.1016/j.pacfin.2020.101284
• Luo, J.-H., Li, X., Wang, L. C., & Liu, Y. (2021). Owner type, pyramidal structure and R&D Investment in China's family firms. Asia Pacific Journal of Management, 38, 1085-1111. https://doi.org/10.1007/s10490-019-09702-z
• Ly, T. T. H., & Duc, N. K. (2018). Corporate governance, pyramid ownership, and firm value: Evidence from Vietnam. Journal of Asian Business and Economic Studies, 25(1), 85-102. https://doi.org/10.24311/jabes/2018.25.S01.4
• Marchica, M., & Mura, R. (2005). Direct and Ultimate Ownership structures in the UK: An intertemporal perspective over the last decade. Corporate Governance, 13(1), 26-45. https://doi.org/10.1111/j.1467-8683.2005.00401.x
• Masulis, R., Pham, P., & Zein, J. (2011). Family business groups around the world: Financing advantages, control motivations, and organizational choices. Review of Financial Studies, 24, 3556-3600. https://doi.org/10.1093/rfs/hhr052
• Maug, E. (1997). Boards of directors and capital structure: alternative forms of corporate restructuring. Journal of Corporate Finance, 3, 113-139. https://doi.org/10.1016/S0929-1199(96)00010-7
• Mindzak, J. & Zeng, T. (2018). The impact of pyramid ownership on earnings management. Asian Review of Accounting, 26(2), 208-224. https://doi.org/10.1108/ARA-11-2016-0130
• Morck, R. (2005). How to eliminate pyramidal business groups - the double taxation of inter-corporate dividends and other incisive uses of tax policy. Tax Policy and the Economy, 19, 135-179. https://doi.org/10.1086/tpe.19.20061898
• Morck, R., Percy, M., Tian, G., & Yeung B. (2005). The rise and fall of the widely held firm: A history of corporate ownership in Canada In R. Morck (Ed.) A history of corporate governance around the world: Family business groups to professional managers, University of Chicago Press, 65-148.
• Nenova, T. (2003). The value of corporate voting rights and control: A cross-country analysis. Journal of Financial Economics, 68(3), 325-351. https://doi.org/10.1016/S0304-405X(03)00069-2
• Perkins, S., Morck, R., & Young, B. (2014). Innocents abroad: The hazards of international joint ventures with pyramidal group firms. Global Strategy Journal, 4(4), 310-330. https://doi.org/10.1002/gsj.1087
• Pursey, P., Heugens, P., & Zyglidopoulos, S. (2008). From social ties to embedded competencies: the case of business groups. Journal of Management & Governance, 12(4), 325-341. https://doi.org/10.1007/s10997-008-9064-7
• Renneboog, L. (1999). Shareholdings concentration and pyramidal ownership structures in Belgium: Stylized facts, Onderzoeksrapport Nr. 9634, Department Toegepaste Econmische Wetenschappen, Katholieke Universiteit Leuven, 1-48.
• Renneboog, L. (2000). Ownership, managerial control and the governance of companies listed on the Brussels stock exchange. Journal of banking & finance, 24(12), 1959-1995. https://doi.org/10.1016/S0378-4266(99)00128-4
• Riyanto, Y., & Toolsema, L. (2008). Tunneling and propping: A justification for pyramidal ownership. Journal of Banking and Finance, 32(10), 2178-2187. https://doi.org/10.1016/j.jbankfin.2007.12.044
• Sánchez-Ballesta, J., & García-Meca, E. (2007). A metaanalytic vision of the effect of ownership structure on firm performance. Corporate Governance: An International Review, 15(5), 879-892. https://doi.org/10.1111/j.1467-8683.2007.00604.x
• Shah, M.H., Xiaob, Z., Abdullahc , Qureshd, S., & Ahmad, M. (2020). Internal pyramid structure, contract enforcement, minority investor protection, and firms' performance: Evidence from emerging economies. Research in International Business and Finance, 52, https://doi.org/10.1016/j.ribaf.2019.101170
• Shleifer, A., & Vishny, R. (1997). A survey of corporate governance. Journal of Finance, 52, 737-783. https://doi.org/10.1111/j.1540-6261.1997.tb04820.x
• Smart, S.B., & Zutter, C.J. (2003). Control as a motivation for underpricing: A comparison of dual and single-class IPOs. Journal of Financial Economics, 69(1), 85-110. https://doi.org/10.1016/S0304-405X(03)00109-0
• Su, K. (2015). The inner structure of pyramid and capital structure: Evidence from China. Economics: The Open-Access, Open-Assessment E-Journal 9. https://doi.org/10.5018,economics-eJ.ournal.J.a.2015-14
• Su, K., Wan, R., & Song, W.Y. (2018). Pyramidal structure, risk-taking and firm value1 Evidence from Chinese local SOEs. Economics of Transition Volume, 26(3), 401-427. https://doi.org/10.1111/ecot.12156
• Su, Y., Xu, D., & Phan, P. (2008). Principal-principal conflict in the governance of the Chinese public corporation. Management and Organization Review, 4(1), 17-38. https://doi.org/10.1111/j.1740-8784.2007.00090.x
• Taylor, S., & Whittred, G. 1998. Security design and the allocation of voting rights: Evidence from the Australian IPO market. Journal of Corporate Finance, 4(2), 107-131. https://doi.org/10.1016/S0929-1199(97)00012-6
• Villalonga, B., & Amit, R. (2008). How are US family firms controlled? Review of Financial Studies, 22(8), 3047-3091. https://doi.org/10.1093/rfs/hhn080
• Vintila, G., Gherghina S.C., & Nedelescu M. (2014). The effects of ownership concentration and origin on listed firms' value. Empirical evidence from Romania. Romanian Journal of Economic Forecasting, 17(3), 51-71.
• Wang, H.-D., Lin, Ch.-H., Cho, Ch.-Ch. (2020). The dark and bright sides of agency problems: Evidence from insider compensation of family pyramidal firms. Asia Pacific Management Review 25(3), 122-133.
• Wooldrigde, J. 2000. Introductory Econometrics. A Modern Approach, South-Western College Publishing.
• Young, M., Peng, M., Alstrom, D., Bruton G., & Jiang, Y. (2008). Corporate governance in emerging economies: A review of the principal-principal perspective. Journal of Management Studies, 45(1), 196-220. https://doi.org/10.1111/j.1467-6486.2007.00752.x
• Yurtoglu, B. (2003). Corporate governance and implications for minority shareholders in Turkey. Journal of Corporate Ownership and Control, 1, 72-86.
• Zattoni, A. 1999. The structure of corporate groups: The Italian case. Corporate Governance, 7(1), 38-48.

Identyfikatory

DOI

10.5709/ce.1897-9254.462