The Separation of Ownership and Control
An Analysis of Ultimate Ownership in Western European Corporations
Mara Faccio * and Larry H.P. Lang **
Abstract.
We analyze the ultimate ownership and control of 3,740 corporations in five Western European
countries. We document that families are the most pronounced type of controlling shareholders in
Western Europe. In fact, they control 43.9 percent of Western European firms. We also document
a significant concentration of wealth within a small number of families. We report that, in Western
Europe, pyramids and cross-holdings are used to gain control, and hence a significant separation
of ownership from control is achieved but not to the benefit of controlling owners.
1. Introduction.
Recent studies suggest that the Berle and Means's (1932) model of widely dispersed
ownership is not common even in developed countries.1 Large shareholders control a significant
number of firms in many countries, including many wealthy ones.2 To examine the nature and
pattern of control by large shareholders, La Porta, Lopez-de-Silanes and Shleifer (1999a) traced
the chain of ownership to ultimate owners for a limited sample of 30 firms per country for 27
countries and documented the nature of the ultimate controlling owners and the means they used
to enhance control. Their findings suggested that ownership and control can be separated through
deviations of one-share-one-vote, pyramiding and cross-holdings to the benefit of the large
shareholders. A follow-up study by Claessens, Djankov, and Lang (2000) contributed to the
literature by expanding the sample size to 2,980 listed firms in nine East Asian countries.3 They
documented the overwhelming control of wealth by a small number of families and confirmed a
significant separation of ultimate ownership and control.