Insider Ownership, Shareholder Structures and Corporate Governance
BOOK
Cite BOOK
Style
Moldenhauer, B. (2007). Insider Ownership, Shareholder Structures and Corporate Governance. Verlag Wissenschaft & Praxis. https://doi.org/10.3790/978-3-89644-429-5
Moldenhauer, Benjamin. Insider Ownership, Shareholder Structures and Corporate Governance. Verlag Wissenschaft & Praxis, 2007. Book. https://doi.org/10.3790/978-3-89644-429-5
Moldenhauer, B (2007): Insider Ownership, Shareholder Structures and Corporate Governance, Verlag Wissenschaft & Praxis, [online] https://doi.org/10.3790/978-3-89644-429-5
Format
Insider Ownership, Shareholder Structures and Corporate Governance
Entrepreneurial and Financial Studies, Vol. 9
(2007)
Additional Information
Book Details
Pricing
Abstract
The question whether a relationship between insider ownership - i. e. direct shareholdings of managers in their firms - and corporate performance exists increasingly attracts attention in academia as well as in investment practice. The work on hand is an important contribution to this strand of corporate governance research especially as most of the relevant studies refer to Anglo-Saxon capital markets. This study investigates the relationship between insider ownership and corporate performance on the basis of a new and unique data set of German corporations. The results of this study are very interesting from both an academic and practical perspective. They provide evidence that the development of investment strategies should not disregard companies’ ownership structures and shed new light on the role of insider ownership as a corporate governance mechanism. Finally, this work constitutes the first comprehensive overview on the development of shareholder structures of German listed stock corporations.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Preface | V | ||
| Acknowledgements | VII | ||
| Table of Contents | IX | ||
| List of Figures | XV | ||
| List of Tables | XVII | ||
| List of Abbreviations | XXI | ||
| 1 Corporate Governance and the Role of Insider Ownership | 1 | ||
| 1.1 Why Do Corporate Governance and Insider Ownership Matter? | 1 | ||
| 1.2 Aims of the Study | 6 | ||
| 1.3 Structure of the Analysis | 8 | ||
| 2 Fundamentals of Corporate Governance | 11 | ||
| 2.1 Definition and Understanding of Corporate Governance | 11 | ||
| 2.2 Corporate Governance Mechanisms | 14 | ||
| 2.2.1 Business Objective and Shareholder Value | 14 | ||
| 2.2.2 Conflicts between Shareholders and Management | 16 | ||
| 2.2.3 Mechanisms to Control Management | 17 | ||
| 2.3 Basic Types of Corporate Governance Systems | 22 | ||
| 2.3.1 The Capital Market Oriented System | 23 | ||
| 2.3.2 The Corporate Law Oriented System | 25 | ||
| 2.3.3 Which Corporate Governance System is Best? | 26 | ||
| 2.4 The German System of Corporate Governance | 28 | ||
| 2.4.1 Historical Development | 28 | ||
| 2.4.2 Status Quo | 33 | ||
| 2.4.3 Characteristics and Idiosyncrasies | 36 | ||
| 2.4.4 Trends and Outlook | 38 | ||
| 3 Causes and Consequences of Shareholder Structures in Theory and Practice of Corporate Governance | 43 | ||
| 3.1 The Separation of Ownership and Control | 43 | ||
| 3.2 Constitution of the German Stock Corporation | 47 | ||
| 3.2.1 Management Board | 48 | ||
| 3.2.2 Supervisory Board | 49 | ||
| 3.2.3 Shareholders’ Meeting | 51 | ||
| 3.3 Shareholders’ Objectives and Control Incentives | 53 | ||
| 3.3.1 Systematization of Shareholders’ Interests | 53 | ||
| 3.3.2 Shareholder Identity as Differentiating Factor | 55 | ||
| 3.3.2.1 Insider Individuals (MGMT) | 56 | ||
| 3.3.2.1.1 Members of the Management Board (MB) | 56 | ||
| 3.3.2.1.2 Members of the Supervisory Board (SB) | 58 | ||
| 3.3.2.1.3 Former Members of the Boards (FBM) | 60 | ||
| 3.3.2.2 Non-financial Companies (CORP) | 61 | ||
| 3.3.2.2.1 Business Groups (BGR) | 61 | ||
| 3.3.2.2.2 Corporations (COR) | 62 | ||
| 3.3.2.3 Financial Institutions (FINC) | 63 | ||
| 3.3.2.3.1 Banks (BANK) | 63 | ||
| 3.3.2.3.2 Insurance Companies (INSR) | 65 | ||
| 3.3.2.3.3 Investment Companies (INVC) | 66 | ||
| 3.3.2.3.4 Domestic Institutional Investors (INST) | 66 | ||
| 3.3.2.3.5 Foreign Institutional Investors (INST-F) | 69 | ||
| 3.3.2.4 Federal, State and Municipal Government (GOV) | 70 | ||
| 3.3.2.5 Miscellaneous (MISC) | 70 | ||
| 3.3.2.5.1 Outsider Individuals (INVD) | 70 | ||
| 3.3.2.5.2 Employees (EMP) | 71 | ||
| 3.3.2.5.3 Others (OTH) and Treasury Shares (TRE) | 72 | ||
| 3.3.3 Shareholder Concentration as Differentiating Factor | 73 | ||
| 3.3.3.1 Minority Shareholders | 74 | ||
| 3.3.3.1.1 Smallholders | 74 | ||
| 3.3.3.1.2 Simple Blockholders | 76 | ||
| 3.3.3.1.3 Dominating Blockholders | 78 | ||
| 3.3.3.2 Majority Shareholders | 79 | ||
| 3.3.3.2.1 Simple Majority Blockholders | 79 | ||
| 3.3.3.2.2 Super Majority Blockholders | 80 | ||
| 3.4 Shareholders, Management and Conflicts of Interest | 81 | ||
| 3.4.1 Introductory Remarks | 81 | ||
| 3.4.2 Systematical Analysis of Potential Conflicts of Interest | 82 | ||
| 3.4.2.1 Between Shareholders and Management | 82 | ||
| 3.4.2.2 Among Shareholders | 86 | ||
| 3.4.3 Ways and Means for Overcoming Conflicts of Interest | 87 | ||
| 4 Insider Ownership and its Effects on Corporate Performance | 91 | ||
| 4.1 Insider Ownership According to Different Theoretical Views | 91 | ||
| 4.1.1 The Neoclassical View | 91 | ||
| 4.1.2 The Institutional View | 93 | ||
| 4.1.2.1 Introductory Remarks | 93 | ||
| 4.1.2.2 Transaction Cost Theory | 95 | ||
| 4.1.2.3 Property Rights Theory | 96 | ||
| 4.1.2.4 Principal Agent Theory | 98 | ||
| 4.2 Empirical Evidence on Insider Ownership and Performance | 102 | ||
| 4.2.1 Determinants and Effects of Insider Ownership | 102 | ||
| 4.2.2 Overview of Empirical Studies on Insider Ownership | 104 | ||
| 4.2.2.1 Descriptive Studies on the German Market | 106 | ||
| 4.2.2.2 Studies on Insider Ownership and Performance | 110 | ||
| 4.2.3 Selected Studies on Insider Ownership and Performance | 120 | ||
| 4.2.3.1 Results from Capital Market Oriented Systems | 120 | ||
| 4.2.3.2 Results from Corporate Law Oriented Systems | 123 | ||
| 4.2.3.2.1 Germany | 123 | ||
| 4.2.3.2.2 Other Nations | 125 | ||
| 4.2.4 Shortcomings of German Research | 127 | ||
| 5 Hypotheses on Causes and Effects of Insider Ownership | 129 | ||
| 5.1 Determinants of Insider Ownership | 129 | ||
| 5.2 Insider Ownership and Corporate Control | 131 | ||
| 5.3 Insider Ownership and Corporate Performance | 137 | ||
| 6 Empirical Analysis of Insider Ownership in German Public Stock Corporations | 143 | ||
| 6.1 Study Design | 143 | ||
| 6.2 Sample and Data | 146 | ||
| 6.2.1 Sample Selection | 146 | ||
| 6.2.2 Data and Sources | 150 | ||
| 6.3 Definition of Variables | 156 | ||
| 6.3.1 Shareholder Structure Variables | 156 | ||
| 6.3.1.1 Introductory Remarks | 156 | ||
| 6.3.1.2 Shareholder Identity | 157 | ||
| 6.3.1.3 Shareholder Concentration | 161 | ||
| 6.3.2 Performance Variables | 162 | ||
| 6.3.3 Control and Other Variables | 166 | ||
| 6.4 Descriptive Results | 170 | ||
| 6.4.1 Shareholder Structures Variables | 170 | ||
| 6.4.1.1 Shareholder Identity | 170 | ||
| 6.4.1.1.1 Control Rights | 170 | ||
| 6.4.1.1.2 Cash Flow Rights | 181 | ||
| 6.4.1.1.3 Control and Cash Flow Rights | 182 | ||
| 6.4.1.1.4 Ultimate and Direct Ownership | 185 | ||
| 6.4.1.2 Shareholder Concentration | 187 | ||
| 6.4.1.2.1 Largest Shareholder | 188 | ||
| 6.4.1.2.2 Blockholders | 191 | ||
| 6.4.1.2.3 Number of Blockholders | 195 | ||
| 6.4.2 Performance Variables | 198 | ||
| 6.4.3 Control and other Variables | 200 | ||
| 6.5 Overview of Hypotheses | 204 | ||
| 6.6 Methodology | 206 | ||
| 6.7 Results I: Determinants of Insider Ownership | 208 | ||
| 6.7.1 Simple Regression Analysis | 208 | ||
| 6.7.2 Difference in Means | 209 | ||
| 6.7.3 Multiple Regression Analysis | 212 | ||
| 6.7.4 Discussion of Results | 213 | ||
| 6.8 Results II: Insider Ownership and Corporate Control | 215 | ||
| 6.8.1 Simple Regression Analysis | 215 | ||
| 6.8.2 Correlation Analysis | 217 | ||
| 6.8.3 Difference in Means | 219 | ||
| 6.8.4 Discussion of Results | 222 | ||
| 6.9 Results III: Insider Ownership and Corporate Performance | 224 | ||
| 6.9.1 Correlation Analysis | 224 | ||
| 6.9.2 Difference in Means | 227 | ||
| 6.9.3 Multiple Regression Analysis | 229 | ||
| 6.9.3.1 Base Case (Cross Section 2003) | 229 | ||
| 6.9.3.2 Base Case Extended (Cross Section 2003) | 234 | ||
| 6.9.3.3 Base Case (Cross Section 1998) | 238 | ||
| 6.9.3.4 Base Case (Cross Section 1993) | 240 | ||
| 6.9.3.5 Base Case (Pooled Sample) | 242 | ||
| 6.9.3.6 Models of Dynamic Ownership | 244 | ||
| 6.9.4 Robustness Tests | 246 | ||
| 6.9.4.1 Alternative Performance Measures | 246 | ||
| 6.9.4.2 Endogeneity | 251 | ||
| 6.9.4.3 Multi-Collinearity | 255 | ||
| 6.9.5 Discussion of Results | 256 | ||
| 6.10 Limitations of the Empirical Study | 261 | ||
| 7 Conclusion and Implications | 265 | ||
| 7.1 Conclusion | 265 | ||
| 7.2 Implications | 266 | ||
| 7.2.1 For Research and Theory | 266 | ||
| 7.2.2 For Practice | 270 | ||
| Appendix | 275 | ||
| A Exemplary Shareholder Structure Classification | 277 | ||
| B Results I: Determinants of Insider Ownership | 279 | ||
| C Results II: Insider Ownership and Corporate Control | 283 | ||
| D Results III: Insider Ownership and Corporate Performance | 289 | ||
| E Results III: Insider Ownership and Corporate Performance - Robustness | 309 | ||
| F Exemplary Ownership Filings in the U.S. and Germany | 315 | ||
| References | 317 |