Effects of Ownership Concentration on the Performance of Austrian Listed Companies

Nouman Afgan


This paper applies panel data techniques to Austrian non-financial listed companies for investigating the managerial discretion hypothesis and asymmetric information. We ana­lyse full population of non-financial companies listed on the Vienna Stock Exchange from 2007- 2020. Equipment investment is susceptible to cash flows, providing evidence that over-investment leads to returns on investment lower than cost of capital. CFi,t-1/Ki,t-1 has a strongly positive effect in family-owned companies’ constraints. Cash constraints pre­vent firms from attaining optimal investment level. CFi,t-1/Ki,t-1 positively affects invest­ment providing strong evidence that state-owned companies’ managers exercise discre­tion while investing cash flows in sub-optimal projects. The effect of voting rights (VR) of ulti­mate shareholders on performance is an inverted U-curve with turning point at 49.8% VR concentration. Beyond this point downward slope provides strong evidence of en­trench­ment hypothesis, with negative entrenchment effect dominating the incentive ef­fect. Ul­timate shareholders’ expropriation is detrimental for minority shareholders. Large share­holders’ detrimental behaviour slows down growth of financial markets. @font-face {font-family:"Cambria Math"; panose-1:2 4 5 3 5 4 6 3 2 4; mso-font-charset:0; mso-generic-font-family:roman; mso-font-pitch:variable; mso-font-signature:-536870145 1107305727 0 0 415 0;}@font-face {font-family:Palatino; panose-1:0 0 0 0 0 0 0 0 0 0; mso-font-charset:77; mso-generic-font-family:auto; mso-font-pitch:variable; mso-font-signature:-1610611969 2013274202 341835776 0 403 0;}p.MsoNormal, li.MsoNormal, div.MsoNormal {mso-style-unhide:no; mso-style-qformat:yes; mso-style-parent:""; margin:0cm; text-align:justify; text-indent:14.2pt; mso-pagination:widow-orphan; font-size:12.0pt; font-family:Palatino; mso-fareast-font-family:"Times New Roman"; mso-bidi-font-family:"Times New Roman"; mso-ansi-language:EN-GB; mso-fareast-language:EN-US;}.MsoChpDefault {mso-style-type:export-only; mso-default-props:yes; font-size:10.0pt; mso-ansi-font-size:10.0pt; mso-bidi-font-size:10.0pt; mso-font-kerning:0pt; mso-ligatures:none;}div.WordSection1 {page:WordSection1;}


corporate governance; managerial discretion hypothesis; Tobin’s q; fixed Investment

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DOI: http://dx.doi.org/10.5281/zenodo.8174743

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