Firm performance when ownership is very concentrated: Evidence from a semiparametric panel

We consider the effect on performance of very large controlling shareholders, who are mostly organized in voting blocks and business groups, in a sample of Belgian listed firms from 1991 to 2006. Since the shape of the relation between ownership and firm value is a controversial issue in corporate finance, we use semiparametric local-linear kernel-based panel models. These models allow us not to impose a priori functional restrictions on the relation between ownership and performance. Our semiparametric analysis shows that the effect on performance varies depending on the size of ownership stakes and that there are departures from linearity, especially in family firms. Our results suggest that this non-linearity in family firms is related to whether or not the CEO is a family member.