Does Ownership Structure Affect Performance? Evidence from the Italian Market


*Bocconi University, Department of Management, Viale Filippetti 9, 20136, Milan, Italy. Phone: +39-02-5836-3624; Fax: +39-02-5836-3691; E-mail:


Manuscript Type: Empirical

Research Question/Issue: This paper aims at exploring the relationship between ownership structure and firm performance in the context of a small European capital market. Further developing existing literature, we acknowledge the multi-dimensionality of ownership by including both the fraction of shares owned by the five largest shareholders and the fraction of shares owned by management.

Research Findings/Results: Using panel data for the period 2000–2003 with respect to the Italian market, we find that the ownership concentration of the five largest shareholders is beneficial to firm valuation. On the contrary, managerial ownership is beneficial only in non-concentrated firms, suggesting that the controlling owner may use his/her position in the firm to extract private benefits at the expense of the other shareholders by appointing managers that represent its own interest.

Theoretical Implications: This study provides empirical support for the agency theory and the managerial entrenchment argument. As such, it suggests new avenues of research for the ownership structure literature willing to reflect the diverging interests of different types of shareholders and to explore both endogeneity and non-linearity issues.

Practical Implications: This study contributes to the recent debate on the effects of government regulations inspired by the Anglo-Saxon model of corporate governance in the small European countries. In questioning the alleged competitive superiority of the widely held company, our paper also suggests that the existence of good corporate law is not a sufficient condition for the development of a corporate economy resembling the US model.