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Equity Ownership and Firm Value in Emerging Markets

Published online by Cambridge University Press:  06 April 2009

Karl V. Lins
Karl V. Lins
Affiliation:
finkvl@business.utah.edu, David Eccles School of Business, University of Utah, 1645 E. Campus Center Drive, Salt Lake City, UT 84112.
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Abstract

This paper investigates whether management stock ownership and large non-management blockholder share ownership are related to firm value across a sample of 1433 firms from 18 emerging markets. When a management group's control rights exceed its cash flow rights, I find that firm values are lower. I also find that large non-management control rights blockholdings are positively related to firm value. Both of these effects are significantly more pronounced in countries with low shareholder protection. One interpretation of these results is that external shareholder protection mechanisms play a role in restraining managerial agency costs and that large non-management blockholders can act as a partial substitute for missing institutional governance mechanisms.

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Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 38 , Issue 1 , March 2003 , pp. 159 - 184
Copyright
Copyright © School of Business Administration, University of Washington 2003

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