SIZE EFFECT IN THE RELATIONSHIP BETWEEN EQUITY OWNERSHIP STRUCTURE AND CORPORATE PERFORMANCE
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This paper investigates the relationship between firm performance and different kinds of corporate equity ownership—insider ownership. Institutional ownership, and block holder ownership—for a sample of 2,822 publicly listed companies in the United States in 1998. There are significant differences between small and large firms in the relationship between ownership structure and firm performance. Specifically, for small firms, institutional ownership has a significant positive effect on firm performance, while block holding has a negative but insignificant effect. In contrast, for large firms, blockholding has a significant negative effect on firm performance, and institutional ownership has a positive but insignificant effect. It appears that the roles played by these large shareholders are different for small firms vs. large firms. Insider ownership has no significant effect on firm performance, indicating that, on average, firms have endogenously-determined optimal degrees of insider holding.
Abstract
This paper investigates the relationship between firm performance and different kinds of corporate equity ownership—insider ownership. Institutional ownership, and block holder ownership—for a sample of 2,822 publicly listed companies in the United States in 1998. There are significant differences between small and large firms in the relationship between ownership structure and firm performance. Specifically, for small firms, institutional ownership has a significant positive effect on firm performance, while block holding has a negative but insignificant effect. In contrast, for large firms, blockholding has a significant negative effect on firm performance, and institutional ownership has a positive but insignificant effect. It appears that the roles played by these large shareholders are different for small firms vs. large firms. Insider ownership has no significant effect on firm performance, indicating that, on average, firms have endogenously-determined optimal degrees of insider holding.