The Ultimate Ownership of Western European Corporations

The Ultimate Ownership of Western European Corporations
Mara Faccio * and Larry H.P. Lang **
(Forthcoming, Journal of Financial Economics)
Abstract
We analyze the ultimate ownership and control of 5,232 corporations in 13 Western European
countries. Firms are typically widely held (36.93 percent) or family controlled (44.29 percent).
Widely-held firms are more important in the U.K. and Ireland, family-controlled firms in
continental Europe. Financial and large firms are more likely to be widely-held, while nonfinancial
and small firms are more likely to be family-controlled. State control is important for
larger firms in certain countries. Dual class shares and pyramids are used to enhance the control
of the largest shareholders, but overall there are significant discrepancies between ownership
and control in only a few countries.
1. Introduction
Recent studies suggest that Berle and Means’ (1932) model of widely-dispersed
corporate ownership is not common, even in developed countries.1 In fact, large shareholders
control a significant number of firms in many countries, including developed ones. To examine
ownership and control by large shareholders, La Porta, Lopez-de-Silanes and Shleifer (1999)
traced the control chains of a sample of 30 firms in each of 27 countries. They documented the
ultimate controlling owners and how they achieved control rights in excess of their ownership
rights through deviations from the one-share-one-vote rule, pyramiding, and cross-holdings.
Claessens, Djankov, and Lang (2000) carried out a similar task for 2,980 listed firms in 9 East
Asian countries.2 They found significant discrepancies between ultimate ownership and control,
allowing a small number of families to control firms representing a large percentage of stock
market capitalization.