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Foundation Control and Investment Performance: Do intrinsic aspects of ownership and control matter?
Jönköping University, Jönköping International Business School, JIBS, Center for Family Enterprise and Ownership. Jönköping University, Jönköping International Business School, JIBS, Economics, Finance and Statistics.
2012 (English)In: Global Economy & Finance Journal, ISSN 1834-5883, Vol. 5, no 2, 58-78 p.Article in journal (Refereed) Published
Abstract [en]

This paper investigates the relevance of intrinsic motives in the value-enhancing monitoring role of large shareholders. A standard view in the corporate governance literature is that the large shareholder monitors management precisely because of personal financial interests. This paper argues that the exclusive focus on extrinsic considerations sidesteps the intrinsic motives of the large shareholder to minimize managerial opportunism and inefficiency. The paper sheds light on the importance of the intrinsic aspects of firm ownership and control by examining the relative investment performance of foundation controlled firms listed on the Stockholm Stock Exchange during 1999-2005. Foundations are not-for-profit organizations with no residual claimants and thus largely lack the personal financial motives to monitor management. The empirical analysis is carried out in the framework of the marginal q methodology. The results suggest that whereas the typical firm in the sample overinvests, the extent of overinvestment is significantly lower in firms with at least one large shareholder. More importantly, the results suggest that even though foundations largely lack the residual claimants and, hence, the personal financial interest, they are as efficient as other large shareholders in curbing managerial opportunism. This finding is consistent with the view that large shareholders are not only actuated by extrinsic motives to minimize managerial opportunism and inefficiency. Intrinsic motives matter.

Place, publisher, year, edition, pages
2012. Vol. 5, no 2, 58-78 p.
Keyword [en]
Large shareholders, foundations, non-personal wealth incentives, social embeddedness, investment performance
National Category
Economics
Identifiers
URN: urn:nbn:se:hj:diva-17703OAI: oai:DiVA.org:hj-17703DiVA: diva2:505140
Available from: 2012-02-23 Created: 2012-02-23 Last updated: 2013-01-09Bibliographically approved
In thesis
1. Essays on Financing and Returns on Investment
Open this publication in new window or tab >>Essays on Financing and Returns on Investment
2011 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This dissertation consists of an introductory chapter and three independent essays on financing investment and their returns. The first essay studies the impact of remittances on domestic investment. The analysis is carried out with a focus on the moderating roles of domestic financial development and institutional quality. The empirical results suggest that remittance inflows are associated with increased domestic investment spending, particularly under conditions of inadequate financial intermediation and poor institutional quality. The second essay evaluates whether remittance inflows into the developing world impedes or spurs manufacturing growth. This study uses manufacturing data on a sample of 40 remittance dependent economies over the period from 1991 to 2004. The results suggest that remittance inflows accelerate manufacturing growth. This evidence is robust to industry- and year-specific effects, a range of country level control variables, and a number of estimators. The final essay examines the monitoring role of large shareholders and returns on investment. Specifically, the paper investigates the relevance of intrinsic motives of the large shareholder to monitor management in order to induce optimal return on investment. The findings suggest that large shareholders are actuated by both intrinsic and extrinsic motives to minimize managerial opportunism and inefficiency.

Place, publisher, year, edition, pages
Jönköping International Business School, 2011. 165 p.
Series
JIBS Dissertation Series, ISSN 1403-0470 ; 74
National Category
Economics
Identifiers
urn:nbn:se:hj:diva-17704 (URN)978-91-86345-25-9 (ISBN)
Opponent
Supervisors
Available from: 2012-02-23 Created: 2012-02-23 Last updated: 2012-02-23Bibliographically approved

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CiteExportLink to record
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Citation style
  • apa
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