The Role of Large Shareholders in Firm Profitability: Evidence from Spanish Listed Firms

Laura Cabeza-García (University of León (Spain))
Silvia Gómez-Ansón (University of Oviedo (Spain))
María Sacristán-Navarro (Rey Juan Carlos University (Spain))

Abstract: Our paper aims to contribute to the corporate governance literature mechanisms by studying the determinants of ownership held by the large shareholders and whether they enhance firms’ profitability. For a sample of Spanish listed companies within the period 2003-2008, we find that firms’ performance, risk and industry help explain differences in the percentage of shares hold by the largest/ultimate owner of listed firms. Besides, after controlling for the endogeneity of ownership structure, the results do not seem to support a significant effect of the holdings of the largest shareholder on firms’ profitability, but they do suggest that the presence of a second large shareholder may limit the private benefits of control of the largest shareholder and enhance firm profitability.

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