Controlling shareholders and corporate value: Evidence from Thailand

Abstract

This study investigates the effects of controlling shareholders on corporate performance. The empirical results, based on a unique database of Thai firms, do not support the hypothesis that controlling shareholders expropriate corporate assets. In fact, the presence of controlling shareholders is associated with higher performance, when measured by accounting measures such as the ROA and the sales-asset ratio.Since most of the firms do not implement control mechanisms to separate voting and cash flow rights, the controlling shareholders might be self-constrained not to extract private benefits. Otherwise, they would internalize higher costs of expropriation from holding high stakes. The controlling shareholders' involvement in the management, however, has a negative effect on the performance. The negative effect is more pronounced when the controlling shareholder-and-manager's ownership is at the 25-50 percent.The evidence also reveals that family controlled firms display significantly higher performance. Foreign controlled firms as well as firms with more than one controlling shareholder also have higher ROA, relative to firms with no controlling shareholder.JEL Classification: G30, G32

Ownership Structure and Bank Performance

“…[6] indicates that more than 40 percent of publicly traded firms in nine East Asian countries are controlled by family. [15] finds that about 80 percent of non-financial companies in Thailand are family owned, while [16] finds that majority of companies listed on Bombay Stock Exchange are controlled by families. [17] in their study of the largest ultimate owners of East Asian countries reports that the ownership structure of most Asian countries is highly concentrated with Malaysia Although studies addressing the issue of ownership structure and bank performance have increased rapidly in the past few years, but the theoretical and empirical evidences did not conclusively resolve the issue.…”

“…This ratio is in accordance with the definition of substantial shareholders under Malaysia Securities Industry Act 1983. [15] contends that the choice of cut-off points should be based on economic or legal frameworks of the given country. The ratio used in this study however, is smaller compared to [14], who uses 10 percent and [17], who focuses on shareholders with 50 percent of direct voting rights.…”

Do Women in Top Management Affect Firm Performance? Evidence from Indonesia

“…Employing a sample of Thai listed firms, Wiwattanakantang (2001) provides evidence that family-controlled firm performs significantly better. In contrast, Krivogorsky (2006) reveals that family ownership has a negative association with market performance, using a sample of firms in nine European countries.…”

Discovering important factors of intangible firm value by association rules

“…By such structures, they make the gap between voting rights and cash flow rights larger and the incentive of entrenchment stronger, and then the value of firm decreases (Wiwattanakantang, 2001). …”

“…Jung and Kwon (2002) and Lins (2003) show that institutions, external, or large non-management shareholder are incentivized to monitor their management and protect their assets. Wiwattanakantang (2001) indicates that firms with more than one controlling shareholder have higher return on assets by monitoring each other to reduce agency cost, related to firms with no controlling shareholder. Oxelheim and Randoy (2003) suggest that foreign exchange listing signals a firm"s commitment to the higher disclosure standards prevailing in the market in which it lists.…”