Does the proxy for shareholders' control make a difference in firm-performance regressions? Evidence from a blockholder system of corporate governance

Abstract

One of the critical determinants of firm performance in corporate governance investigations is the degree of control exercised by large shareholders. This article empirically assesses the use of ultimate-owner ship shares and solutions of voting games (i.e. power indices) as alternative proxies for this control.

Notes

¹ See Leech and Manjón (2002) and Manjón-Antolín (2004) for further details on this data set.

² I use dummies for different types of largest shareholders (state, banks and families) to represent the locus of control. Nonfinancial corporations are the residual category. For market competition, I use utilities and manufacturing-sectors dummies, the ratio of net operating result to sales as a measure of gross cash flow (as in e.g. Himmelberg et al ., 1999) and the proportion of total sales exported (as in e.g. Leech and Leahy, 1991). Finally, macroeconomic shocks and time-specific effects not controlled by the other covariates should hopefully be reflected in the year-average of the daily IBEX-35 (an index of the 35 most liquid securities quoted on the Spanish Stock Exchanges).