Meta-analyzing ownership concentration and firm performance in Asia: Towards a more fine-grained understanding

We present a meta-analysis of the relationship between concentrated ownership and firm financial performance in Asia. At the cross-national level of analysis, we find a small but significant positive association between both variables. This finding suggests that in regions with less than perfect legal protection of minority shareholders, ownership concentration is an efficient corporate governance strategy. Yet, a focus on this aggregate effect alone conceals the existence of true heterogeneity in the effect size distribution. We purposefully model this heterogeneity by exploring moderating effects at the levels of owner identity and national institutions. Regarding owner identity, we find that our focal relationship is stronger for foreign than for domestic owners, and that pure “market” investors outperform “stable” or “inside” owners whom are multiply tied to the firm. Regarding institutions, we find that a certain threshold level of institutional development is necessary to make concentrated ownership an effective corporate governance strategy. Yet we also find that strong legal protection of shareholders makes ownership concentration inconsequential and therefore redundant. Finally, in jurisdictions where owners can easily extract private benefits from the corporations they control, the focal relationship becomes weaker, presumably due to minority shareholder expropriation.

J. (Hans) van OosterhoutEmail:

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Pursey P. M. A. R. Heugens   (PhD, Erasumus University) is a professor of organization theory at the Rotterdam School of Management, Erasmus University. His research interests include bureaucracy and institutional theories of organization, comparative corporate governance, and business ethics. Marc van Essen   is a PhD student at the Rotterdam School of Management, Erasmus University. He holds an MSc degree in economics and law from Utrecht University. His research interests include shareholder activism, comparative corporate governance, and meta-analytic research methods. J. (Hans) van Oosterhout   (PhD, Erasumus University) is a professor of corporate governance and responsibility at the Rotterdam School of Management, Erasmus University. His research interests include the positive and normative theory of organizations and institutions, comparative corporate governance and management and governance of professional service firms.