Ownership and performance

Ownership and Performance
Term Paper, Corporate Governance University of Mannheim
Antonio García del Campo

1. Introduction
This paper, analyses the relationship between the distribution of share ownership, and his affection on the company's performance through the review of different theories and literature on this topic. While the theme of "Corporate Governance" seems a degree ofmodernity, the truth is that their use can be traced to contexts as old as Aristotle's Greece or the Roman Republic, where public and private corporate structures with presence of multiple shareholders may be sighted. Likewise, the classical economists, concern the relationship between majority and minority shareholders, advancing with them the first overtones of modern governance structures. Adam Smith,referring to companies controlled by the managers said: "The directors of such [joint-stock] companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Negligence and profusion, therefore, mustalways prevail, more or less, in the management of the affairs of such a company." (Smith, A.; 1776) During the last decade, the global academic and institutional environments are often interested considerably in topics related to corporate governance practices. These practices, considered essential in the relationship between corporate shareholders and various stakeholders interested in developing it,assume a particular asset structure, which affect the course and development of the company. There are, in terms of ownership and control structures, two basic standards found worldwide (Table 1). The first, dominant in the U.S. and the UK, is based on ownership structures where ownership is diffused and fragmented, and dispersed voting power(control). The second, prevailing in the rest of theworld, is based on proprietary structures where the ownership and control(voting power) is concentrated. Both standards of ownership structure, predetermine different solutions to the relations between the various shareholders of the company. Similarly ownership structures tend to vary over time, making it necessary to review the practices in order to keep current with the realities of thebusiness. This has motivated the development of a wide academic literature that postulates that seek to institutionalise practices appropriate governance of companies. Table 1 Concentration of Ownership around the world
Country Ownership of Main Shareholder (%) 61.0 51.0 55.0 44.0 52.0 57.0 5.4 8.6

Latin America (2002)
White Paper on Corporate Governance for Latin America

Argentina Brasil ChileColombia México Perú

United States (1999)
Van der Elst, Christph. Industry-Specifities and Size Corporations: Determinants of Ownership

EEUU- NYSE EEUU-NASDAQ

Europe (1999)
Betch, Marco & Barca, Fabrizio. The Control of Corporate Europe Pajuste, Anete & Olsson, Mikael. Ownership Concentration: The case of Baltic States.

Belgium France Germany Italy Spain United Kingdom AustriaNetherlands Sweden Finlad Poland Slovenia Estonia Latvia Lithuania

41.7 52.0 46.1 48.1 37.9 18.3 52.0 43.5 34.9 32.8 42.4 27.4 61.1 49.5 44.7 48.6 20.4 33.6 28.9

Asia (1998)
Zhuang, Juzhong; Edwards, David; Capulong, Virginita

Indonesia Korea Filipinas Thailand

The current mainstay of the research on issues of governance is based on the thesis of Berle and Means (1932). This thesispresents a vision of a modern corporation in which there is a low supervision by the owners and a strong management, supported by the board of directors, and suggest that an inverse correlation should be observed between the diffuseness of shareholding and firm performance.

2. Agency Theory
The work of Berle and Means (1932) generated a stream of research that joins the study of Jensen and...