Ownership structures and firm performance

Abstract

In 1932, Adolph Berle and Gardiner Means espoused their vision of the quasi-public corporation as the new organizational paradigm of the economic sphere in “The Modern Corporation and Private Property”. The quasi-public corporation, characterized by the separation of ownership and control, and “as all embracing as was the feudal system in its time”, has long dominated our approach in most fields of economics and corporate finance. We have recently begun to question the Berle and Means vision of the modern corporation on empirical grounds. The seminal paper by La Porta, Lopez-de-Silanes, and Schleifer (1999) first highlighted the rarity of the dispersed ownership structure, even in large publicly traded firms in developed economies. In addition, the corporate structure as outlined in 1932 has progressively evolved into more complex organizational structures, such as those represented by conglomerates (Maksimovic and Phillips, 2007) and business groups (Khanna and Yafeh, 2007). As a result, new fields of research emerged to try to account for the diversity of ownership structures and to re-interpret their economic impact. The study of the relationship between ownership structures and firm behaviour is the central object of the present thesis. My focus lies with two organizational forms, business groups and family firms, and how their specificities affect their management and product market strategies. In the first chapter of this thesis, ownership structure instruments are used in order to study the interaction between R&D subsidies and financing constraints. The second chapter revisits the traditional deep pocket theory on the entry deterrent effect of firm cash holdings, taking into account the existence of internal capital markets within business groups. The third chapter explores, during times of CEO transitions within family firms, the influence of the identity of the successor on labor contracts.