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An analysis of majority owner-managed companies in the UK


  • doi: 10.1111/j.1467-629x.2007.00253.x

  • The authors would like to thank Roger Buckland, Julio Pindado, seminar participants at the European Financial Management Association Annual Meeting 2004, and Leeds University Business School for helpful comments on earlier versions of this paper. We would also like to thank Martin Kemmitt for helpful research assistance. The authors acknowledge financial support received from the Committee of Heads of Accounting. The normal caveat applies.


This paper investigates the characteristics of 73 UK companies in which managers have an ownership stake of greater than 50 per cent. We find that majority owner-managed companies make less use of alternative corporate control systems and are less likely to remove their chief executive officer or other board members following poor performance. However, our sample firms actually outperform diffusely held companies of similar size in the same industry. The determinants of majority control appear more closely related to the characteristics of the controlling shareholders rather than the firm's operating environment. Changes in the ownership structure of our sample companies owe more to changes in owner-specific characteristics and security issuance than they are related to changes in the company's operating environment or company performance. We conclude that despite the obvious agency costs of managerial entrenchment for closely held companies, for the present sample at least the incentive alignment benefits of large director shareholdings are beneficial to outside shareholders.

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