Does stable ownership create value? Evidence from the global financial crisis
We investigate the value of stable ownership for a sample of European firms using the global financial crisis as an exogenous shock and pre-and post-crisis years as benchmark periods. Consistent with the argument that stable ownership allows managers to focus on the creation of long-term value, we find that stable ownership resulted in higher stock returns and a higher market-to-book ratio during the crisis. This positive effect of stable ownership was not reversed after the crisis. Stable institutional blockholdings were more valuable in countries with weaker investor protection. However, the positive effect does not apply to firms in which a family is the largest blockholder. Finally, we also find that ownership stability was associated with a higher level of investments, illustrating that stable ownership affects real corporate decisions.
KeywordsOwnership stability Family ownership Institutional ownership Global financial crisis Firm value Investments
JEL ClassificationG01 G32
We are grateful to two anonymous reviewers, Christina Atanasova, Christophe Boone, Andriy Boytsun, Eric de Bodt, Corneel Defrancq, Marc Jegers, Ann Jorissen, Eddy Laveren, Sophie Manigart, Gianluca Mattarocci, Armin Schwienbacher, Tensie Steijvers, Christophe Van der Elst, and seminar participants at the Australasian Finance and Banking Conference in Sydney, the AIDEA conference in Lecce, the Corporate Finance Day in Ghent, the Skema Business School (Lille) and the Politecnico de Milano for helpful comments and suggestions. We also thank Christine Lippens for her help with data processing. Financial support from the Flemish Agency for Innovation by Science and Technology (IWT, Grant No. SBO 90061) is gratefully acknowledged. All remaining errors are ours.
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