Equity ownership concentration and firm growth: the moderating role of industry growth
ISSN: 2040-8269
Article publication date: 10 April 2024
Issue publication date: 28 May 2024
Abstract
Purpose
The effects of ownership concentration on firm performance usually considers two conflicting perspectives: monitoring and expropriation hypotheses. Past studies have produced mix findings. This study aims to shed light on this relationship by focusing on a specific measure of firm performance, firm growth. The moderating effect of industry growth in the aforementioned relationship is also considered, which advances knowledge on the role of moderators.
Design/methodology/approach
This study resorts to data from a sample of 21,476 Portuguese firms, which is examined using hierarchical linear modelling. This approach is adequate because the data has a hierarchical structure: the firms are nested within industries.
Findings
The results show that equity ownership concentration has a positive effect on firms’ growth and that industry growth amplifies this relationship. Ownership concentration can spur effective monitoring, thereby alleviating principal–agent conflicts of interest and speeding up decision-making, enabling timely competitive actions that promote growth.
Research limitations/implications
The research conceives ownership structure in two groups. However, equity ownership concentration often acquires more complex shapes. In addition, the data used is from a single country.
Practical implications
The results show that firms pursuing growing strategies and operating in growing industries benefit from equity concentration.
Originality/value
Different from past studies, this study focuses on firm growth performance and considers the moderating effect of industry growth.
Keywords
Acknowledgements
This work has been funded by national funds through FCT – Fundação para a Ciência e a Tecnologia, I.P., through project UIDB/05037/2020 with DOI 10.54499/UIDB/05037/2020.
Citation
Torres, P., Silva, P. and Augusto, M. (2024), "Equity ownership concentration and firm growth: the moderating role of industry growth", Management Research Review, Vol. 47 No. 7, pp. 1096-1111. https://doi.org/10.1108/MRR-03-2023-0165
Publisher
:Emerald Publishing Limited
Copyright © 2024, Emerald Publishing Limited