Typical structures of ownership in emerging markets and how to choose proxy variables for the type of owner (literature review).

Структура собственности и как выбрать прокси переменную для типа owner.

Typical structures of ownership in emerging markets and how to choose proxy variables for the type of owner (literature review).

There were analyzed 20 researches on different emerging markets that presented in the following table. The first colimn contains information about researchers, year and emerging market, the second – about testing hypotheses or result; the last column gives information about what kind of proxies were used to include ownership structure in regression analysis.

Author and Market	Test, result	proxy
Alfaraih M. et al. 2012. Kuwait Stock Exchange.	Test: impact of government and institutional omwership on company performance. Result: government ownership (-), institutional (+)	INST - Proportion of the ordinary shares held by institutional investors that own at least 5% of the firm shares to the total shares outstanding of the firm. GVT: Proportion of the ordinary shares held by government that owns at least 5% of the firm shares to the total shares outstanding of the firm
Cespedes et al. 2010, Latin America	Positive relation between leverage and ownership concentration	Measurement ownership concentration via Herfindahl index (the sum of the squares of the fractions).
Chung, Korea	Research of voting premium	% Ownership of largest shareholder, % Ownership of 2^nd largest shareholder, % Ownership of 5% largest shareholder, fraction of shares with voting rights
Ivashkovskaya, Stepanova	Impact of financial architecture on performance	REL - Proportion of shares held by investors involved into the process of corporate governance, %; BLD - Dummy variable which is equal to 1 if there is a shareholder possessing more than 25% of shares and involved into the process of corporate governance; GOV - Proportion of shares held by the federal and municipal institutions and by the government-related companies, %; (В русской версии: доля акций в руках инвесторов, вовлеченных в процесс управления; доля в руках менеджеров; институциоанльных инвесторов; в руках государства)
Chen & Yu, 2012, Taiwan SE	Impact of managerial ownership and diversification on firm performance. U-shaped relationship between managerial ownership and diversification	Managerial ownership: the percentage of officer and director shares outstanding rather than using the measure of executive ownership (as Goranova)
Abdelsalam et al., 2008, Egypt	Positive association between institutional ownership and firm performnace, and both dividend decision and payout ratio	Ownership structure is measured by four variables: managerial ownership ratio, blockholder ownership ratio, institutional ownership ratio and free float ratio
Mollah et al., 2012, Botswana	Negative effect of ownership on performance (explained by high agency problem)	Fractions of different shareholders: governments, institutionals, public, foreign
Farooq, Jai, 2012 Morocco	No significant impact of ownership concentration on earnings management, firms with foreign or local institutions as the largest shareholders engage in significantly lower earnings management	shareholding of the largest shareholder, identity (foreign or local)
Farooque 2010, Dhaka SE	Influence of corporate performance and other governance factors on ownership structure	fractions of institutionals, top-1 shareholder, minority, board of directors
Liang et al., 2011, Taiwan	Institutional ownership negatively influences performance (especially in the mature stage); life-cycle stage plays important role in relationships between ownership and firm performance	Insider ownership concentration: (Fraction of shares held by the members of the board, blockholders, and managers); Institutional ownership concentration
Ruan et al., 2009 China’s Civilian-run Firms	Managerial ownership significantly affects capital structure, and capital structure affects corporate performance directly	proportion of managers’ stockownership
Xia et al., 2008, China’s listed entrepreneurial companies		Founder (dummy) = 1 when the ultimate controlling shareholders are the founder of the listed firms or their preexistences, and 0 otherwise;
Liang, 2009, Taiwan public electronic firms	different levels of ownership structure have different impacts on firm performance	Board ownership - the fraction of stakes owned by board members by all outstanding stakes (NB!: to determine non-monotonic relationships, there BO is divided into three variables: 0~0.05~0.25 and higher);
Cueto, 2008, Latin America	Voting rights, cash-flow rights. The negative relationship between firm value and the dominant shareholder’s voting rights; a positive relationship between firm value and voting rights for blockholders; negative correlation between dominant shareholders’ voting rights and other blockholders’ voting rights;	1) 1^st regression: the percentage of voting rights held by the dominant shareholder; the ratio of the percentage of cash-flow rights to the percentage of voting rights held by the dominant shareholder; the difference of the percentage of voting rights and the percentage of cash-flow rights held by the dominant shareholder; a dummy variable that takes the value of 1 if the dominant shareholder is a corporation or member of a family group 2) 2^nd regression: the percentage of voting rights held by the second largest shareholder provided that it is not an institutional investor or government; the sum of the percentage of voting rights held by all large blockholders (Family+Corp+Other) excluding dominant shareholders; an indicator variable equal to 1 if an aggregated blockholder exists, as defined in BHS, 0 otherwise; the percentage of voting rights held by institutional investors excluding dominant shareholders; the percentage of voting rights held by governments excluding dominant shareholders; CIGOWN = INSOWN + GOVOWN, the percentage of voting rights held by combined institutional investors and governments excluding dominant shareholders.
Shahid, 2003, Egyptian Stock Market, CASE	ownership percentage influences certain dimensions of accounting performance indicators but not stock market performance indicators	ownership dummy variables for holding companies, public banks & insurance, other private institutions, and management
Zeitun, 2009, Jordan	A negative correlation between ownership concentration and firm’s performance is found (ROA, Q) while there is a positive impact on firm performance MBV; government ownership: negative correlation but decreases probability of default	cumulative percentage of shares held by the largest five shareholders, the Herfindahl index of ownership concentration (the sum of squared percentage of shares controlled by each top 5 shareholders); the fraction owned by government; the fraction owned by the foreigner; the fraction owned by companies; the fraction owned by individuals
Shah et al., 2011,	The relationship between ownership structure and performance of firms appears to be negative in our findings. This led us to relate our results with the entrenchment hypothesis.	the percentage of shares held by directors as representative of company’s ownership structure
Ivasaki, 2008, Russia	Studying the determinants of corporate board composition	a 6-point scale of the combined ownership share of corporate ownership and foreign investors (OWNOUT), the share ownership by the top manager (OWNCEO) and the management group ownership in the total number of outstanding shares (OWNMAN), a large management shareholder dummy (MANSHA)
Udalzov, 2008, Russia	Significant impact of ownership structure on investing activity	Number of owners; fraction of manager: from 0 to 7%, 7 to 25%, 25 to 50%, 50% to 100%; fraction of private owners; fraction of minorities
Pirogov, Bobrishev; 2009, Russia	Relationships between agency costs and ownership structure	Man_Own – manager is owner; Manrshare – fraction of management; Manrshare^2; FstShrOwn – fraction of major shareholder; Own>50 – if fraction of major shareholder more that 50%; NonManSharehls – number of shareholders; GovOwn – fraction of government

According to the table 1, we can conlude that using of certain proxy for ownership structure depends on what kind of relationships the authors explore, whether they study the impact of ownership structure on the firm performance (Alfaraih; Ivashkovskaya, Stepanova; Chen; Abdelsalam, Mollah etc.), or agency costs (Pirogov), investing activity (Udalzov), firm leverage (Cespedes). Country belonging also makes difference in applied variables and methods. For example, researches that investigate Latin America companies, China, often include variable presenting the ownership of founder or family, like Xia et al. (2008), Cueto (2009) etc. because many companies were founded as family business and still held by their descendants. Some countries are more or less open for foreign investors, so it became necessary to consider also foreign ownership (Mollah et al., 2012; Farooque, Jai 2012; Zeitun, 2009). The most of investigations consider the impact of following agents: government, institutional investors, managers (as the share of top manager – CEO, or/and the management group ownership in the total number of outstanding shares) because they, as wee saw the above, play huge role in firms functioning and performance. So authors frequently use the fractions in shareholding of managers, institutionals and government. Relating to aim and hypotheses some authors use all three above-listed variables, or only some of them. For instance Alfaraih et al. (2012) considered Government anf Institutional ownership, Abdelsalam et al. (2008) – Managerial and Institutional ownership, Ruan et al. (2009) – simply Managerial ownership and so on. Because of specific types of owners in emerging markets, authors tend to consider the fraction of company’s founder or members of family, which founded company. Often, authors extend the managerial ownership to so-called insider ownership, taking into consideration managers as well as members of board and blockholders (Liang; 2009). At the same time, some authors emphasize using the percentage of officer and director shares outstanding rather than using the measure of executive ownership (Goranova et al., 2007; Chen, Yu, 2012)

Sometimes researchers add to equation dummy variables, especially when the fraction of some owner is very large, as a rule, larger than 50%. For example, Ivasaki adds dummy variable, presenting a large management shareholding, which equals 1, when the ownership of management is more than 50%, and 0 otherwise (such dummy is used also by Ivashkovskaya and Stepanova when shareholder possesses more than 25%; choosing border depends greatly on peculiarities of national corporate law and governance); Xia adds dummy variable, illistrating the ownership of company founder: dummy equals to 1 when the ultimate controlling shareholders are the founder of the listed firms or their preexistences, and 0 otherwise. Many researchers tend to take into account shareholdings that exceed some significant level, for example 5% (Alfaraih et al.)

It also should be noticed that to proceed in the ownership concentration, researcher use standard Herfindahl-Hirshman index, that in this case, is measured as the sum of the squares of the fractions.

Rarely authors include the fraction of other companies, minority, 2 largest shareholders (Chung), foreign companies or private shareholders or institutions, free float ratio, fraction of shares with voting / cash-flow rights.

Typical owner in Latin America.

Concentration of ownership of Latin American firms is significantly higher to those in developed economies. Cespedes et al., (2010) study the ownership sturcture and its influence on company leverage, that is company’s capital structure, using sample covering seven Latin American countries. It is historically formed that many companies in Latin America belong to certain founders, because they were found as family business and still held by them throughout decades. Typically, founders have major share in equity and they are not willing to share the control over company with someone else. So it became typical that the most companies raise capital by using debt instruments rather than issuing new stocks.

Let’s consider typical ownership structure of Latin American companies in example of Brazilian firms.

Situation in Brasil is typical to situation in Latin America. For example, 77.3% of companies, listed in BOVESPA, cotrolled by one large shareholder that have more than 50% of voting shares; and only in 7% firms there is no stockholder with fraction more than 20%. Relating to main shareholders, in 53% of cases it is a family, in 18% of cases – foreign investors, and in 8% cases – government.

Moreover by Brazilian corporate law issuing large amount of preferred stock without voting rights is allowed (up to 67%), so most part of shareholders isolated from governance by company and one can control the whole company with quite small participation in equity (Carvalhal-da-Silva, Leal; 2005). All countries in Latin America have the same legal origin, which is French Civil Law. According to La Porta, under French Civil Law investors are less protected (La Porta et al., 1997). Moreover “investors' expropriation risk is more severe, the cost of capital is higher, firms pay less in dividends, and, in general, the level of financial development in the region is very low (Chong et al., 2007). It also should be noticed that tax benefits are less, cost of financial distress is very high, companies are more bureaucratic. As in the other emerging capital markets, the Latin American firms have few options to raise capital.

Besides families, substancial fractions in many companies are presented by various government structures and institutional investors. The role of the lasts demonstrates trend to grow for last years, especially this concerns pension funds, which total fraction in all listed Brazilian companies equals to 15%. Concerning government ownership, it should be mentioned, in spite of privatization, that began in 90s, the official authorities holdings is quite large.

So the key characteristics of Brazilian corporate governance structures are ownership concentration and the quasi-absolutist exercise of power by family/controlling shareholders. Such ownership structure is primarily a response to the domestic legal and macroeconomic environment in which companies operate (Oman, 2003). The role of government and institutional investors are also huge, but less than the role of families and business groups.

Дата добавления: 2015-10-21