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Impact of ownership concentration on stock returns: a case of developed economies

Impact of ownership concentration on stock returns: a case of developed economies The primary objective of this study is to determine how concentrated ownership affects stock returns by country and scale (by market capitalization), like large, medium, and small-cap firms in selected developed economies of the world.Design/methodology/approachUsing a dataset comprising 12,751 annual observations from 850 listed companies from developed economies from 2004 to 2018, the study employs panel data models and instrumental variable estimation to mitigate endogeneity bias.FindingsThe findings reveal a significant and positive correlation between ownership concentration and expected returns on corporate equities in developed economies. Furthermore, the study categorizes firms into distinct size categories and finds nuanced differences in the relationship between ownership concentration and stock returns across large, medium, and small-cap enterprises. The results of the study reveal that ownership concentration (by country) and scale (Large, medium, and small) have a significant and positive impact on the stock returns of firms in developed economies.Practical implicationsthe practical implications of this study extend to investors, firms, policymakers, regulators, and other stakeholders involved in the financial markets. By considering these implications, stakeholders can make informed decisions to enhance market efficiency, investor protection, and overall market integrity.Originality/valueTo the authors' understanding, this study is the first to examine the impact of concentrated ownership on excessive stock returns across countries and scales, with an explicit focus on large, medium, and small companies in select developed economies worldwide. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Journal of Business Emerald Publishing

Impact of ownership concentration on stock returns: a case of developed economies

Ali, Asif; Masood, Omar
American Journal of Business , Volume 39 (3): 20 – Jul 5, 2024
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References (69)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1935-5181
DOI
10.1108/ajb-05-2023-0075
Publisher site
See Article on Publisher Site

Abstract

The primary objective of this study is to determine how concentrated ownership affects stock returns by country and scale (by market capitalization), like large, medium, and small-cap firms in selected developed economies of the world.Design/methodology/approachUsing a dataset comprising 12,751 annual observations from 850 listed companies from developed economies from 2004 to 2018, the study employs panel data models and instrumental variable estimation to mitigate endogeneity bias.FindingsThe findings reveal a significant and positive correlation between ownership concentration and expected returns on corporate equities in developed economies. Furthermore, the study categorizes firms into distinct size categories and finds nuanced differences in the relationship between ownership concentration and stock returns across large, medium, and small-cap enterprises. The results of the study reveal that ownership concentration (by country) and scale (Large, medium, and small) have a significant and positive impact on the stock returns of firms in developed economies.Practical implicationsthe practical implications of this study extend to investors, firms, policymakers, regulators, and other stakeholders involved in the financial markets. By considering these implications, stakeholders can make informed decisions to enhance market efficiency, investor protection, and overall market integrity.Originality/valueTo the authors' understanding, this study is the first to examine the impact of concentrated ownership on excessive stock returns across countries and scales, with an explicit focus on large, medium, and small companies in select developed economies worldwide.

Journal

American Journal of Business – Emerald Publishing

Published: Jul 5, 2024

Keywords: Ownership concentration; Stock returns; Developed economies; Firm size; IV GMM

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