Ownership control intensity, corporate financial performance and revenue growth since the global financial crisis

Abstract

The 2008 global financial crisis showed that despite the corporate governance scholars and regulatory efforts of the past 30 years, shareholders’ investments remain at risk due to poor or dishonest decisions made by some distinct groups of corporate stockholders. Using structural equation modeling (SEM), this study investigated the influence of ownership control on 222 public US companies’ performance after the 2008 financial crisis. The authors identify a new construct representing a third dimension (control intensity) of ownership structure, whereas previous literature has identified only two dimensions: identity and concentration. The control intensity construct of managerial ownership was measured using the number of manager-owners among individual shareholders instead of using the traditional ownership concentration measurement method. The study indicates that the higher the individual ownership stake and the lower managerial ownership control intensity are in an organization, the stronger the negative influence of individual ownership on corporate performance and growth