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The ownership structure of European blue chips: is
there a convergence in corporate ownership?
By
Pierfrancesco Bresolini Eibenstein
2016
A Dissertation presented in part consideration for the degree of
Master of Science in Business and Management
Abstract
The two main models of corporate governance originated in the second part of the 20th
century: the shareholder model, in the Anglo-Saxon world, and the stakeholder model, in
Continental Europe. They are respectively mainly characterized by widespread and
concentrated ownership and, consequently, by different agency problems. However, with
the phenomenon of globalisation, the increased importance of financial markets and the
international success of Anglo-American multinational firms, a debate has arisen as to
whether there exists a convergence towards the shareholder oriented model. This research
aims to explore this controversy by focusing the analysis on the ownership structure of the
blue chip firms in the main stock indexes of Germany, France, Italy, Spain and the UK. The
research concludes that a convergence in corporate governance structure towards the
shareholder model seems to exist in almost all of those countries.
Keywords
Ownership; Corporate ownership; Corporate governance; Convergence corporate
governance; Corporate governance systems; Shareholders; Blue chips
Contents
List of Figures ........................................................................................ I
List of Tables ........................................................................................ II
Introduction ........................................................................................... 1
1 Background and literature review ................................................ 3
1.1 Corporate governance definitions ......................................... 5
1.2 Ownership and control ........................................................ 6
1.3 Models of corporate governance ........................................... 8
1.4 Is there a convergence? .................................................... 16
1.5 Research proposition ........................................................ 22
2 Methodology........................................................................... 24
2.1 Data ............................................................................... 26
2.2 Methodology of data analysis ............................................. 26
3 Data analysis .......................................................................... 29
3.1 Germany ......................................................................... 29
3.2 France ............................................................................ 32
3.3 Italy ............................................................................... 35
3.4 Spain .............................................................................. 39
3.5 UK .................................................................................. 43
3.6 General analysis ............................................................... 46
3.7 Statistical analysis ............................................................ 53
4 Results and discussion ............................................................. 58
Conclusion ........................................................................................... 62
References
I
List of Figures
Figure 1 DAX 30 ownership data .......................................................... 29
Figure 2 DAX 30 median and mean data ............................................... 30
Figure 3 Frequency of ownership in DAX 30 .......................................... 31
Figure 4 Types of largest investors in DAX 30 ........................................ 31
Figure 5 Location of largest investors in DAX 30 .................................... 32
Figure 6 CAC 40 ownership data .......................................................... 33
Figure 7 CAC 40 median and mean data ............................................... 33
Figure 8 Frequency of ownership in CAC 40 .......................................... 34
Figure 9 Types of largest investors in CAC 40 ........................................ 34
Figure 10 Location of largest investors in CAC 40 .................................... 35
Figure 11 FTSE MIB ownership data ....................................................... 36
Figure 12 FTSE MIB median and mean data ............................................ 37
Figure 13 Frequency of ownership in FTSE MIB........................................ 38
Figure 14 Types of largest investors in FTSE MIB ..................................... 38
Figure 15 Location of largest investors in FTSE MIB ................................. 39
Figure 16 IBEX 35 ownership data ......................................................... 40
Figure 17 IBEX 35 median and mean data .............................................. 40
Figure 18 Frequency of ownership in IBEX 35 .......................................... 41
Figure 19 Types of largest investors in IBEX 35 ....................................... 42
Figure 20 Location of largest investors in IBEX 35 ................................... 42
Figure 21 FTSE 100 ownership data ....................................................... 43
Figure 22 FTSE 100 median and mean data ............................................ 44
Figure 23 Frequency of ownership in FTSE 100 ........................................ 44
Figure 24 Types of largest investors in FTSE 100 ..................................... 45
Figure 25 Location of largest investors in FTSE 100 ................................. 46
Figure 26 Countries mean ownership comparison .................................... 47
Figure 27 Average size largest shareholder ............................................. 48
Figure 28 Largest shareholders owning more than 25% ............................ 49
Figure 29 Total shareholders owning more than 25% ............................... 50
Figure 30 Frequency of ownership comparison relative values ................... 51
Figure 31 Types of largest investors in relative values .............................. 52
II
List of Tables
Table 1 Countries mean ownership comparison ..................................... 47
Table 2 Hypothesises ......................................................................... 53
Table 3 Descriptives ........................................................................... 54
Table 4 Test of Homogeneity of Variances ............................................. 54
Table 5 ANOVA .................................................................................. 55
Table 6 Multiple Comparisons .............................................................. 56
Table 7 Ownership (Scheffe) ............................................................... 57
Table 8 Ownership (Tukey HSD) .......................................................... 57
1
Introduction
After the Second World War, two main different models of corporate governance
developed: the shareholder model and the stakeholder model. The first one developed in
the Anglo-Saxon world, such as in the UK. The second one developed principally in
Continental Europe and the main exponent is Germany. Those two models are mainly
characterized by widespread ownership, in the case of the shareholder model, and by
concentrated ownership, in the case of the stakeholder model. These differences in
ownership create two diverse agency problems: the principal-agent and the principal-
principal.
However, the last few decades have been characterized by several important
phenomena: globalization, the increased importance of financial markets and the
international success of Anglo-American multinational firms. Those events have led to a
debate about the convergence of corporate governance systems towards the shareholder
oriented model, which is considered the international benchmark. According to Hansmann
and Kraakman (2000), convergence towards the shareholder model is a natural
consequence of these important phenomena that characterize and influence the world. On
the other hand, for Jacoby (2000) convergence is still far off, and perhaps it will never be
achieved. In fact, Bebchuk and Roe (1999) and Salacuse (2002a) argue that a system of
corporate governance contains the values, tradition, the history and the culture of a
society, all of which tend to impede change and convergence towards a new system.
Instead, other authors, such as Aguilera and Jackson (2010), maintain that the
convergence will be at a medium point between the two models, taking the best practices
of everyone.
The problem of convergence seems to be difficult to detect because of the many
variables involved. In fact, attempting to find an overall convergence is probably also not
the best approach because the business environment is characterized by the presence of
many different types of firms of different sizes and characteristics. Also, the convergence
process is gradual, and it is not always so clear-cut. Thus, it is better to analyse and
compare similar types of companies, such as Branson (2001) does. In fact, he identifies a
2
trend of convergence in big firms, because the common factor in these types of firms is
the stock market.
The purpose of this research is to analyse the ownership structure in the blue chip
companies of the most important European countries. The goal is to try to find similarities
and differences in the ownership structure, in order to see if convergence has occurred or
not, and what the current ownership situation for those categories of firms is. Moreover,
there will be also a focus on the type of main investors and their nationalities. In order to
detect if a convergence exists, a new statistical approach of analysis will be undertaken.
In fact, a one-way ANOVA test will be used to see if the average ownership in those indexes
are statistically different or not, thus seeing if these indexes are characterized by
widespread or concentrated ownership.
The dissertation proceeds as follows: section 1 presents the literature review,
background information and definitions. Section 2 describes the methodology applied in
this research, while the data analysis and the findings are presented in section 3. Finally,
Section 4 gives an overall discussion of the results gained, followed by the conclusion.
3
1 Background and literature review
In 1932 Berle and Means published The modern corporation and private property. In this
book, they describe and analyse the ownership structure and control of the 200 largest
firms in the US. They realise that many of those companies were characterized by having
a widely-dispersed ownership, the consequence of which was the separation between
ownership and control (Berle and Means, 1932). This situation in which the ownership is
spread widely between many small shareholders and control is delegated to managers
increases, on one hand, the democratisation of society but, on the other hand, issues arise
in terms of convergence between managers and shareholders’ interests (Berle and Means,
1932; Mizruchi, 2004). In fact, as described by Berle and Means, the opportunistic
behaviour of managers could serve their own interests instead of company and shareholder
interests. Berle and Means, without using the specific term, were the precursors of the
agency theory and their book triggered many other studies on these aspects.
In fact, in 1976, Jensen and Meckling theorized the principal-agent issue. They
refined the concept and underline that, in the presence of dispersed ownership, no investor
wants to bear the cost of monitoring the managers’ behaviour because the benefit is
equally split between all the shareholders. Thus, everyone wants to behave as a free rider
where they can get the benefits without the cost of supporting (La Porta et al., 1997;
Kapopoulos and Lazaretou, 2009). In this situation, managers are left without control and
incentives and they can operate in their own interest (Jensen and Meckling, 1976; Fama
and Jensen, 1983). For example, instead of paying dividends to the investors, they prefer
to use the money into risky or unnecessary projects simply to increase their personal status
and economic benefit as a managers of a bigger company (Mizruchi, 2004). This
phenomenon is called “the agency costs of free cash flow” by Jensen (1986; 1993) and it
is caused by managers’ hubris or overconfidence (Roll, 1986; Hayward and Hambrick,
1997; Malmendier and Tate, 2008).
Because agency costs reduce the value of the firm (La Porta et al., 2002; Claessens
et al., 2002), the academic world has strived to find possible solutions. In particular, Tirole
(2001) suggests three ways to align shareholders and managers’ interests and reduce
4
moral hazard. First, through opportune compensation policies such as bonuses,
compensation liked to performance and stock options, and second through an appropriate
career system. Both aim to incentivise managers to act towards value creation for the firms
and shareholders. Thirdly, through an efficient corporate governance and control structure.
Goergen and Renneboog (2001; 2006) explain the importance of the independence of non-
executive directors in the board in order to efficiently monitor executives. The board of
directors has to act as an intermediary between managers and shareholders (Clayman et
al., 2012). In addition, as an external mechanism of control in this situation of dispersed
ownership, there is the market for corporate control and hostile takeovers, by which a non-
performing company is bought by an external subject and restructured (Zingales, 1998;
Goergen and Renneboog, 2006; Da Silva et al., 2004; Stulz, 1988).
However, the most obvious solution in avoiding the principal-agent problem is to
avoid the free riding problem by having a concentrated ownership or a major shareholder
interested in monitoring and actively check the managers’ performances (Shleifer and
Vishny, 1986). In this case, the opportunistic behaviours by managers are avoided but the
second agency problem is created: the principal-principal problem (Shleifer and Vishny,
1997a; Young et al., 2008) or also called private benefits of control (Grossman and Hart,
1988). In fact, in a situation where a major shareholder who has full control of the company
could, in fact, act on their own personal interest expropriating and reducing the value for
the other minority shareholders or stakeholders (La Porta et al., 2002; Da Silva et al.,
2004; Young et al., 2008). This could happen through the tunnelling mechanism (Da Silva
et al., 2004; Djankov et al., 2008), where, as defined by Johnson et al. (2000: 22), there
is “the transfer of assets and profits out of firms for the benefit of those who control them”,
that is the controlling shareholder. As identified by Johnson et al. (2000) and La Porta et
al. (2000a; 2000b; 2002) expropriation and tunnelling cases are more frequent in nations
with less protection for minority shareholders in terms of laws and regulations.
Even in these cases there are several implications that could be applied as possible
solutions. As mentioned before, the role of the board of directors is always crucial in the
corporate governance of every company and to be compliant with a good corporate
5
governance code could be important (Goergen and Renneboog, 2001). However, the
enhancement of legal protection and transparent accounting could be the most relevant
solutions as well as having no separation between ownership and control (Roe, 2000; La
Porta et al., 2002).
In the real world, the principal-principal is the most common agency problem because
a major part of the world economies is characterized by concentrated ownership (La Porta
et al. 1998; La Porta et al. 1999; La Porta et al., 2002). The Berle and Means model does
not represent global reality (La Porta et al., 1999). Hence, it is important to develop
solutions to combat this most common issue in order to increase economic growth in these
countries (La Porta et al., 1998; Young et al., 2008; Morck et al., 2005).
1.1 Corporate governance definitions
The term “corporate governance” has been used since the late 1970s in the US where it
seems to have arisen during the Watergate scandals in which many important companies
were found to be involved in corruption cases (Veasey, 1993). Since that time, it has
become a term of common use and many academics have tried to find different definitions
while looking at different point of views.
For example, La Porta et al. (2000b: 4) define corporate governance as a “set of
mechanisms through which outside investors protect themselves against expropriation by
the insiders”. They look at corporate governance as a solution to the agency problem
arising by dispersed ownership. This concept was already individuated by Berle and Means
in 1932 even if they did not use the specific term “corporate governance”. A similar
definition perspective was given by Goergen and Renneboog (2006: 100): “a corporate
governance system is the combination of mechanisms which ensure that the management
(the agent) runs the firm for the benefit of one or several stakeholders (principals)”.
A different perspective was given by the Japanese economist Aoki. He defines
corporate governance as “the structure of rights and responsibilities among the parties
with a stake in the firm” (Aoki, 2000: 11). This quotation symbolises the Japanese culture
of respect and clearness.
6
Another important definition was devised by Zingales (1998: 3). He defines “a
governance system as the complex set of constraints that shape the ex-post bargaining
over the quasi-rents generated in the course of a relationship”. He, similarly to Aoki,
focused his definition on the relationship between the parts rather than a mechanism of
control.
In any case, whatever the definition, the importance of a strong corporate
governance is fully recognised to ensure business sustainability and value creation in
today’s globally competitive world (Gompers et al., 2003; Bebchuk et al., 2009; Bebchuk
et al., 2013; Claessens, 2006). In that sense, a survey conducted by Coombers and Watson
(2002) shows the relevant premium price that investors are willing to pay for a well-
governed company. In particular, they saw that in countries with lower shareholder
protection such as countries of East Europe, Africa, Latin America and Asia, investors would
pay a percentage premium an average from 22 to 30%, with maximum values of 41% in
Morocco, 39% in Egypt and 38% in Russia. On the other hand, in Western Europe and
North America, where the legal system guarantees a higher level protection to
shareholders, the same investors are definitely willing to pay a lower premium of 13-14%
for a well-governed company on average.
These data show the practical perception of importance of corporate governance for
institutional investors. Moreover, as underlined by Salacuse (2002b), the ability to attract
foreign investments depends on the corporate governance quality other than good
legislation and legal protection.
1.2 Ownership and control
There is a substantial difference between ownership and control, one that is important to
fully understand in order to grasp the subtleties of the subject. Faccio and Lang (2002)
underline that, as a definition, ownership means the cash flow rights whereas control
means voting rights. More detailed, Leech and Leahy (1991: 1418) define control “as the
power to exercise discretion over major decision making, including specifically the choice
of director”.
7
In the case of one share one vote, there is a total overlap between ownership and
control because every share is worth exactly one vote. However, most times, the real
business situation is not so democratic. In fact, there are several mechanisms that could
be applied in order to maintain control whilst sharing ownership (La Porta et al., 1999).
The most common are: multiple voting rights, ownership pyramids and cross shareholdings
(Da Silva et al., 2004; Fan and Wong, 2002).
First, there could be multiple classes of shares. In this situation, there are ordinary
shares carrying effective voting rights and there are preference shares that do not have
any voting rights but they allow the right to be paid dividends (right of cash flow) prior to
the others (Faccio and Lang, 2002; Da Silva et al., 2004). Double voting right shares or
multiple voting shares also exist, even though they are not legally allowed in many
countries (Faccio and Lang, 2002). Ginglinger and Hamon (2012) argue that the presence
of double voting shares helps the major shareholder to keep full control while increasing
liquidity at the same time. This seems to be highly advantageous for the major shareholder.
However, Jubb (2007) describes double voting rights as a system without transparency
that frustrates the other shareholders and impacts market efficiency because it creates
obstacles to the control mechanisms such as the market for corporate control.
The second most common mechanism used to split ownership and control is the use
of pyramid structures. It is the most commonly-used method in some countries because it
allows investors to keep control with a limited capital investment in the company (Da Silva
et al., 2004). It is a leverage effect which allows for “the possibility of controlling vast
resources with a limited amount of capital” (Bianchi et al., 2001: 154). Pyramid structures
happens when “firm Y has an ultimate owner, who controls Y indirectly through another
corporation that it does not wholly control” (Faccio and Lang, 2002: 372). An example
could be a company Y that owns 51% of voting rights of company X and company X owns
51% of voting rights of company Z. In this case firm X controls company Z with 51% of
voting rights despite only really owning 26% of ownership (51% x 51% = 26%) (Da Silva
et al., 2004). In the case of pyramid structure, the liquidity is negatively affected
(Ginglinger and Hamon, 2012).
8
The third commonly-used method is cross shareholdings. In this method, an intricate
net of reciprocal share ownership by companies exists with the aim of avoiding takeovers
especially from foreign investors (Bloch and Kremp, 2001; Harbula, 2007).
As mentioned before, transparency and trust issues arise from the use of these
methods that can affect the efficiency of the capital markets. Moreover, there is the
consequent creation of agency and entrenchment problems (Kapopoulos and Lazaretou,
2009; Morck et al., 1988). Further still, these mechanisms in corporate governance
enhance the risks of expropriation of the minority shareholders (La Porta et al., 2000a).
According to Bloch and Kremp (2001: 107) the one share one vote practice is optimal
“because it forces someone who wants to obtain control of the company to acquire a share
of the company’s dividend stream commensurate with this control” and the deviation from
this practice is more likely when private benefits of control are larger, which is the case of
countries with a low level of shareholder protection (Grossman and Hart, 1988; Harris and
Raviv, 1988). On the other hand, La Porta et al. (2002) see a correlation between firms
with higher valuations and countries with better protection of minority shareholders,
because, if protected, the investors are willing to invest more.
1.3 Models of corporate governance
A company life starts from a situation in which the firm is private and both ownership and
control are concentrated in the hands of a single person or a single family (Becht and
Mayer, 2001). After that, the normal evolution of a company whose operations have grown
and needs more sources of finance is to go towards IPO and become a listed company.
From that point, Becht and Mayer (2001) describe several ways that a company could
pursue after the IPO depending on the system of corporate governance that a country
applies.
In fact, listed companies in Continental Europe usually tend to maintain concentrated
control. This can be achieved with “neutrality” when, in the situation of one share one vote,
the founder has majority control and ownership. Alternatively, this can also be achieved
with “lock in control”, which refers to when the founder sells part of the ownership while
9
maintaining control, and with “leverage control”, in which, with the use of one of the
methods discussed, voting rights are leveraged over cash flow rights and majority control
is combined with dispersed ownership (Becht and Mayer, 2001). The situation is different
in the UK, where, after being listed, ownership of a company is dispersed as well as control
(Becht and Mayer, 2001).
As mentioned earlier, there are different agency problems that arise from these
different situations. Accordingly, there are different solutions. However, it is important to
note that the main risk in the situation where the control is strongly retained by a major
shareholder that is family-based is a problem of dynastic management (Caselli and
Gennaioli, 2013). Kapopoulos and Lazaretou (2009: 160) define dynastic management as
“the intergenerational transmission of control over assets, a typical feature of the family-
owned firms”. This could be a source of inefficiency if the successor at the head of the
company does not have the talent to run the firm (Kapopoulos and Lazaretou, 2009).
Hall and Soskice (2001) distinguish the two major capitalist models in relation to how
a firm coordinates itself with the other actors in the economy: the coordinated market
economies (CME) such as Germany, Japan, Sweden, Austria and the liberal market
economies (LME) such as the U.S., the U.K., Canada, Australia, New Zealand, Ireland. The
basic point is that in the CME the political institutions try to encourage cooperation between
the players in the economy. In the LME, however, the free market is the focus, and the
political institutions try to encourage competition between the actors (Hall and Soskice,
2001). Consequently, the policies have to fit in with the specific principles of the model
otherwise they could create problems or they might not be able to be implemented by the
businesses (Wood, 2001).
Specifically, the CME is more focused on the relationship between stakeholders, such
as in the job market where there is high level of protection for labour. Therefore, companies
tend to invest in improving employee skill levels and to collaborate effectively with trade
unions. Also they tend to push towards cooperation with other firms. This structure is more
inclined to focusing on quality and on the creation of incremental innovation of existing
products (Hall and Soskice, 2001; Vitols, 2001).
10
On the other hand, the LME system tends to be more individualistic and standardized,
where the employees have general skills and the job market is more dynamic. In this
situation, which is also characterized by a usual absence of cooperation between different
firms, they are more able to produce radical innovations, born from new projects that are
completely detached from the previous ones (Hall and Soskice, 2001; Vitols, 2001). In
general, those differences could be seen as a specific competitive advantage, where
countries focused their businesses on their strength points (Porter, 1980).
Other authors have described corporate governance systems. For example, Jacoby
(2000) splits the two patterns defining the Anglo-American system as a shareholder
system, a market-outsider system or stock-market capitalism. Meanwhile, the system,
which Germany is the main exponent of, is the relational-insider system, the dedicated-
capital system, and welfare capitalism.
More precisely, in addition to these two models Clarke (2016) describes also the Latin
model and the Japanese model, that are similar to the stakeholder model, even if Latin
economies, such as France, Italy and Spain, are characterized by having a more conflict-
based relationship between employers and employees, while the Japanese model is
characterized by the importance of the network (Clarke, 2016).
Instead, Hansmann and Kraakman (2000) show that, after the Second World War,
four models of corporate governance had been developed: the manager-oriented model
(in the US), the labor-oriented model (in Germany), the state-oriented model (in France
and Asia) and the shareholder-oriented model (in the US and the UK).
The manager-oriented model, also called the managerialist model, was a model
developed in the US from the 1930s to the 1960s whose principle was that empowering
professional managers of large business corporations with a great amount of discretion
could incentivise them to act in the interest of the corporation and, consequently, increase
the performance of the firm and public interest (Hansmann and Kraakman, 2000). It was
believed that the free market in managerial talent acts as a system of control. However,
this model collapsed during the 1970s when the agency problem theory demonstrated that
11
in the case of great discretion, managers act for themselves rather than in company
interests (Hansmann and Kraakman, 2000).
The labour-oriented is the historical model developed in Germany, and it is another
name for the CME of Hall and Soskice (2001). Again, it is characterized by a strong
relationship and collaboration between the various stakeholders, especially employers and
employees. Firms invest in their employees and there is the employee participation in
company decisions through the presence of workers’ representatives on the board. This
involvement of employees, that could be also extended with high levels employee welfare
or by profit-sharing with the workers, can create a sense of belonging that secures loyalty
and commitment at work (Eibenstein, 1975). All this fits perfectly with competitive
advantage focused on quality and incremental innovation. Therefore, the enthusiasm for
employee participation resulted in the expansion of the German model into Continental
Europe (Hansmann and Kraakman, 2000). However, the most relevant criticism of this
system is that worker voting participation could lead the company to making inefficient
decisions, paralysis or weak boards due to the lack of interests’ focus. Also, the costs
arising from these negative effects are likely to exceed the potential benefits from
employee participation (Hansmann and Kraakman, 2000).
The state-oriented model is characterized by the prominent role of the state and the
government within the private businesses. This is practically translated into a “substantial
discretion in the hands of government bureaucrats over the allocation of credit, foreign
exchange, licenses, and exemptions from anti-competition rules” (Hansmann and
Kraakman, 2000: 7). This model, unlike economic liberalism of Adam Smith, was present
in France, and in the Soviet Union, and it is currently in use in China, where the state plays
a principal role in the economy (Hansmann and Kraakman, 2000). However, this model
suffered when President Mitterrand abandoned state ownership in favour of private
companies during the 1980s in France and then when the Soviet Union collapsed in the
1990s (Palmer, 2011).
The shareholder-oriented model is the LME described by Hall and Soskice (2001). As
mentioned before, this system is characterized by a market focus in which tight
12
regulations, high levels of transparency and fast movement of capital create a short term
perspective (Kapopoulos and Lazaretou, 2009). The general aim is the maximization of
shareholder value and this shareholders benefit is prioritised over the interests of other
stakeholders (Kapopoulos and Lazaretou, 2009). However, Jensen and Meckling (1976)
argue that the maximisation of shareholder value is equivalent to the maximisation of the
value of every stakeholder, because the shareholder is a residual claimant who receives
payment only after that every other obligation has been fulfilled. However, both this
perspective and model are characterized as “greedy capitalism”, one that was highly
criticised during the recent financial crisis.
In terms of differences, it is important to note that no one corporate governance
system is superior to the others, they are simply different (Otten et al., 2006; Shleifer and
Vishny, 1997b). In particular, the Anglo-American system is characterized by the
importance of the capital markets, and the main investors are the financial institutions
such as mutual funds, pension funds and insurance companies (Becht and Mayer, 2001).
The weaknesses of this system are the high volatility, the focus on the short term and the
usually too fragile corporate governance practices that brought about the last financial
crisis (Clarke, 2016).
On the other hand, in Continental Europe there are relatively few companies listed
on the stock markets and the high level of concentration of ownership and control results
in strong ties between creditors, major shareholders and managers, who are usually
members of the major shareholder’s family (Becht and Mayer, 2001; Da Silva et al., 2004;
Claessens et al., 2002; Faccio and Lang, 2002). The ownership and thus the main investors
in the stakeholder model are families, other companies or banks. In contrast, in Japan,
some firms are part of ‘keiretsus’. They are a group of industrial companies financed by a
bank, in which there is a dense network or reciprocal cross ownership (Becht and Mayer,
200; Clarke, 2016).
With a specific focus on various European countries and the US, Barca and Becht
(2001) have published the first exhaustive work focused on corporate control, with also
13
some focus on ownership, titled The control of corporate Europe (Da Silva et al., 2004;
Goergen and Renneboog, 2006).
Bloch and Kremp (2001) analyse the situation in France. Even in France, they see
high levels of ownership and control concentration in both non-listed and listed companies
as well as the CAC 40, the main index for the top 40 firms for market capitalization. More
specifically, the largest investor owns 66% in non-listed firms, 52% in listed firms and
between 20-30% in the CAC 40 (Bloch and Kremp, 2001). The second largest owner
retained 18% in non-listed companies, 10% in listed and between 5-10% in the CAC 40.
In terms of type of investor, individuals and families were the most significant type in the
non-listed firms, while the holdings were the most important for the listed ones (Bloch and
Kremp, 2001). On the other hand, for the CAC 40 firms, bank and insurance companies
were the most relevant, even if the role of families and individuals was also important. In
particular, “for the CAC 40 firms, individuals are not the largest blockholder, but when they
effectively are present as blockholders, they hold around 30 per cent of the voting rights
and have the control in facts” (Bloch and Kremp, 2001: 123). In the past it was common
the presence of cross shareholding Between French firms. This system was called “financial
core” and it started during the privatizations in the late 1980s (Bloch and Kremp, 2001).
However, the aim, a nationalistic one to prevent French firms from foreign investors, did
not have success (Bloch and Kremp, 2001).
In Germany, the general economy is characterized by a vast presence of small and
medium-sized enterprises (SMEs) and consequently, the ownership and the control are
highly concentrated (Becht and Böhmer, 2001). Even in DAX, the German stock market
index which includes the 30 blue chip companies, the firms are generally owned by a
significant majority shareholder. The role of the banks as universal banks, acting both as
commercial and investment banks, is also historically so important. Specifically, Becht and
Böhmer (2001) identify Allianz AG and Deutsche Bank AG as dominant blockholders in
many cases.
Italy is also characterized by a high concentration of direct ownership in both unlisted
and listed firms (Bianchi et al., 2001). Pyramid structures are very common, and Bianchi
14
et al. (2001: 154) state that “50% of all Italian industrial companies belong to pyramidal
groups”. This makes it difficult to analyse the real control of the companies. Generally,
families and the state play a significant role as owning companies, and in contrast to the
situation in Germany, the role of banks is limited. This was historically a problem for the
financing and the growth of the firms, that was solved by private financing through families
and public financing through the state (Bianchi et al., 2001). In recent years, the central
role of the state has decreased as many cases of privatizations have occurred. It has to be
noted that Italy has a great level of transparency and disclosure after the Draghi Law of
1998, in which ownership of more than 2% has to be disclosed (Bianchi et al., 2001).
In Spain, the role of the state in large companies was prominent before 1994, but
after that year companies were privatized and the state as a shareholder practically
disappeared (Crespí and García-Cestona, 2001). In Spain there is highly concentrated
ownership but, in comparison with the rest of the Europe, Spanish levels are the lowest,
apart from the UK. Banks are not the major shareholders except in the banking and
communication sectors (Crespí and García-Cestona, 2001). Mechanisms to separate
ownership and control are not common in Spain, because the second shareholder is usually
so significant (Crespí and García-Cestona, 2001).
Unlike all the nations described up to this point, the UK is characterized by a high
proportion of listed firms, high investors protection, high level of transparency and a diffuse
ownership structure (Goergen and Renneboog, 2001). Moreover, the most important type
of investor are the institutional investors such as mutual funds, insurance companies and
pension funds. The percentage of equity held by institutional investors rose from 30% in
1963 to 60% in 1992 (Stapledon, 1996) compared of only 20% in Germany (Goergen and
Renneboog, 2001). Institutional investors usually hold a maximum amount of 5.5% of
shares in a company. This can lead to a risk of a passive stance from investors due to a
free riding problem, in which there is no incentive to monitor the management (Goergen
and Renneboog, 2001). It is important to note that, over the years, the UK has developed
important corporate governance codes containing best practices, such as the Cadbury
Report in 1992 which specified the importance of the role of the board of directors and the
15
importance of the independent non-executive directors; the Greenbury Report in 1995
regarding the correct remuneration for the executives; the Hampel Report in 1998 as a
revision of the previous Reports and finally the UK Corporate Governance Code in 2010
containing the best practices in corporate governance to which the listed companies should
comply (Goergen and Renneboog, 2001). Moreover, as Branson (2001) argues, the
evolution in the principles in corporate governance codes in the UK have influenced
corporate law reforms in neighbouring countries such as France and Germany.
The academic world has attempted to find an explanation for why the systems and
the structure of corporate governance differ across the countries, and why there is a certain
development in one country that is different in another one. Kapopoulos and Lazaretou
(2009: 168) argue that “Corporate governance systems evolve in response to underlying
institutional necessities”. Again, Goergen and Renneboog (2001: 280) state that “the
structure is also shaped by regulation”. In fact, the importance of laws and regulations is
primary in the sense that, as logic suggests, companies try to adapt themselves in the
most efficient way to the rules imposed by a country (Da Silva et al., 2004).
La Porta et al. (1997; 1998; 1999) split the world in two parts in relation to the legal
origin: common law or civil law. Specifically, French civil law offers weak protection for
investors, for example against expropriation; German and Scandinavian civil law offers a
medium protection level and English or Anglo-Saxon common law offers a high level of
protection (La Porta et al., 1997; La Porta et al., 1998). They observe that countries with
poor investor protection, as in the case of French civil law, results in more highly
concentration of ownership (La Porta et al., 1997; La Porta et al., 1998). On the other
hand, common law offering good accounting standards and high level of shareholder
protection results in more widespread ownership (La Porta et al., 1998). Hence, the
countries with common law have developed capital markets, while countries with civil law
are characterized by the large use of debt as financing, therefore the role of the banks has
become significant (La Porta et al., 1999).
16
1.4 Is there a convergence?
As globalization expands and relationships between countries become more important and
stronger, a logical consequence is try to see if there is a convergence, a conflict or a
cooperation between systems of corporate governance and cultures that were historically
different (Salacuse, 2003; La Porta et al., 2008). Many studies have been done by many
authors with the aim to see if there is convergence or not in the systems of corporate
governance around the world.
Karl Marx could be considered the first convergence theorist. In fact, the Marxist
philosophy believed in proletarian revolutions and the consequent convergence towards a
new socialist and more equal economic and social system as a response against the
oppressions of the capitalism (Streeck, 2010).
In recent years, the current debate about the convergence of corporate governance
systems was forcefully made by Hansmann and Kraakman (2000) (Yoshikawa and
Rasheed, 2009; Siems, 2010). As mentioned before, these two authors (Hansmann and
Kraakman) describe the development of four models of corporate governance that
originated in the second part of the 20th century: the manager-oriented, the labor-oriented,
the state-oriented and the shareholder-oriented.
They argue that “the triumph of the shareholder-oriented model of the corporation
over its principal competitors is now assured” (Hansmann and Kraakman, 2000: 33) and
they define the shareholder-oriented model as the standard model to which there will be
convergence. They offer two reasons for this. First, they state that the standard model has
gained supremacy while the other three models had failed. Second, and most importantly,
the worldwide competitive success gained by the British and American companies has
contributed to the diffusion of their shareholder-oriented model around the world. The last
one contributed to the influence of the concept of economics and finance, to the diffusion
of widespread ownership in the other developed countries and to the implementation of
new regulations focused on solving the principal-agent problem as well as for the protection
of minority shareholders.
17
Their final conclusion is that, despite the apparent divergence and differences in
corporate governance between the countries around the world, they see an important
convergence of the regulations towards a widespread shareholding system with the
improvement in the protection of minority shareholders and for curtailing the opportunistic
behaviour of managers. Thus, even there are still differences in terms of corporate
governance models, concentrated ownership even in large corporations, capital markets
and corporate culture, they predict that with the development of equity markets in Europe,
there will be convergence towards the standard system (Hansmann and Kraakman, 2000).
Other authors agreed with their idea and prevision of convergence while many other
disagree. Therefore, the debate is still open (Krenn, 2014). Sudarsanam and Broadhurst
(2012) argue that even if the German corporate governance system continued to remain
largely unaltered, the pressure from the globalization of stock markets would push for new
regulation for the protection of the shareholders’ interest. Thus, even the resistance to
change in traditional corporate governance, “in the end was forced to yield to the
shareholder-oriented Anglo-American style governance practices” (Sudarsanam and
Broadhurst, 2012: 265). Krenn (2014) argues that the US and the UK, considered
examples for the best practices in corporate governance matter, have become the
benchmark for governance codes around the world. However, he observes that the
convergence in corporate governance code practices sometimes may be more of a formal
aspect rather than substantial (Krenn, 2014). A similar conclusion has been given by
Yoshikawa and Rasheed (2009). They argue that there is still limited evidence of
convergence towards a unique model of corporate governance and the similarities that
seem to be arise between the countries, in reality, are more form than substance, thus
convergence is just an illusion (Yoshikawa and Rasheed, 2009).
Fiss and Zajac (2004) focus their research on historical data for 100 publicly-traded
companies in Germany. They see that these German companies were adapting to the
Anglo-Saxon model even if a lot of these firms were still resisting this pressure by
maintaining their traditional model of corporate governance: the stakeholder model.
Moreover, the US corporate scandals of the early 21st century have raised concerns about
18
the effectiveness of the Anglo-Saxon shareholder model. This slowed down and even
stopped diffusion between the German firms. Fiss and Zajac (2004: 530) conclude their
research talking about “the significant non-adoption of a shareholder value orientation
among German firms”.
A different outcome has been reached by Lane (2003) about her study of change in
the corporate governance of Germany. Similar to Fiss and Zajac (2004), she observes the
tendency of changing from the classic German coordinated market economy to the Anglo-
American liberal market economy. She recognises the erosion of the German variety of
capitalism and convergence towards the Anglo-Saxon corporate governance system which
had been especially pushed by the big German banks and insurance companies, and also
by the international German listed firms (Lane, 2003). This lobby power has started to
receive consensus from the politicians and, consequently, has triggered a change in both
the business culture and structure of the German system (Lane, 2003). Again, similar to
Fiss and Zajac (2004), she recognises that the Enron and the US scandals of 2001 has
decreased the trust in the American system. However, she maintains that the Sarbanes-
Oxley Act regulation that arose after those scandals has restored investor confidence
(Lane, 2003). The final conclusion that she reached is that the German system has not yet
fully converged, but the logical tendency and prediction is of convergence towards the
Anglo-American system in the next few decades (Lane, 2003).
Instead, a similar conclusion about Germany to that of Fiss and Zajac (2004) has
been reached by Vitols (2001). He argues that “the UK and Germany do not appear to be
converging to one best model of corporate governance” (Vitols, 2001: 359). Thus, despite
the globalization and financial pressure towards the Anglo-Saxon model, it seems that both
Germany and the UK are maintaining their own model without changing and converging to
a different one. Also, he underlines that the countries are incrementally changing in order
to improve their own existing model instead of changing and converging towards a totally
new one (Vitols, 2001).
More generally, Hall and Soskice (2001) in Varieties of Capitalism argue that, despite
the trend of globalization, the different varieties of capitalist economy remain “path
19
dependent” without converging. In particular, they argue that the role of the state is to
provide incentives to the business with respect to the principles of their own model. If a
state tries to modify the regulation in a way that is attempting to change its own model of
corporate governance, those reforms are likely to fail (Hall and Soskice, 2001). It happened
both in Germany and in the UK, where attempts to change or introduce something from
an outside model failed (Hall and Soskice, 2001).
The concept of “path dependence” theory was developed by Bebchuk and Roe (1999).
In this theory, they argue that the corporate governance system that a country currently
applies is strongly influenced by the traditional model of corporate governance developed
in the past. In other words: “an economy’s initial ownership structures directly influence
subsequent choices of ownership structure” (Bebchuk and Roe, 1999: 169). They explain
this phenomenon with two reasons.
First, for efficiency reasons, companies have adapted their own structure to the
system and a change in this could be extremely costly. In particular, the culture, the
political orientation, the market and the ideology linked to the traditional system tend to
impede change and convergence towards a new system (Bebchuk and Roe, 1999).
Second, some corporate players involved in the relationship inside the traditional
corporate governance system act as rent-seekers and they have the power to entrench
themselves and impede changes that could reduce their private benefit of control (Bebchuk
and Roe, 1999). Overall, given these reasons, Bebchuk and Roe (1999) explain why,
despite the convergence happened in the world through the globalization, the corporate
governance of different countries remains different and it does not change or converge
towards a new one (Bebchuk and Roe, 1999).
Another important study, considering the legal origins, was undertaken by La Porta
et al. (2008). They also explain the important role of globalization that played and
continues to play in the exchange of ideas and in the increase of global competition. La
Porta et al. (2008) argue for a reciprocal exchange in regulations between common and
civil law. However, they recognise that “the common law approach to social control of
economic life performs better than the civil law approach” (La Porta et al., 2008: 327),
20
thus in a general situation without systematic shocks it is likely to see a continuous process
of liberalization. However, it has to be noted that this paper was published in June 2008
exactly a couple of months before the onset of the financial crisis.
Many authors believe neither the shareholder oriented model nor the stakeholder
oriented model will be superior over the other. Instead, the convergence will be at a
medium point between the two, in which every model can take the best from the other
and thus improve their effectiveness (Salacuse, 2002a; Salacuse, 2003; Aguilera and
Jackson, 2010). Specifically, Salacuse (2002a) explains that the presence of intangible
aspects is vital in corporate governance systems. In fact, the system of corporate
governance developed by a country is not merely a static model; it contains the values,
tradition, the history and the culture of a society (Salacuse, 2002a; Salacuse, 2003; Roe,
1993; Bebchuk and Roe, 1999; Clarke, 2016). Thus, it is not so easy to entirely replace a
system of corporate governance (Salacuse, 2002a).
Da Silva et al. (2004) were surprised because, despite strong competition and
globalization around the world, the level of regulations in the area of corporate governance
have not further converged. This could be explained by economic factors regarding
ownership and control of the firms (Goergen and Renneboog, 2003). In particular, it was
seen that after an IPO German companies continue to maintain a major shareholder that
retains full control. In contrast, after an IPO ownership in the UK is going to be widespread
as well as the control of the company (Goergen and Renneboog, 2003).
A thorough explanation of this phenomenon lies in the current regulations. In fact,
concentrated ownership in large corporations still remains frequent in many parts of the
world because the weak corporate governance regulation allows the major shareholder to
obtain and maintain the private benefits of control (Bebchuk, 1998). Hence, if the
regulations do not change, the control remains concentrated and there will not be
convergence towards the Anglo-American practice of widespread control (Bratton and
McCahery, 1999).
A similar conclusion was previously reached by Roe (1993). He observes that the
prediction made about an increasing level of ownership fragmentation in worldwide
21
companies may become a reality in the future, but for the moment it remains only a
prevision. In fact, in both Germany and Japan, concentrated ownership practise has
increased instead of decreasing (Roe, 1993). Thus, we are quite far from a state of
convergence.
Classically, Berle and Means (1932) considered the future expansion worldwide of
the US model characterized by firms with widespread shareholders and consequently, the
separation between ownership and control. In reality, the evaluation of that convergence
prevision is critically summarized by a laconic sentence from La Porta et al. (1998: 498)
“Berle and Means have created an accurate image of ownership of large American
corporations, but it is far from the universal image”.
Again, the pressure from the financial markets, globalization and the growth of
successful multinational firms has pushed the global corporate governance systems
towards the shareholder oriented model (Palmer, 2011; Branson, 2001). Furthermore, the
companies and the systems that failed to conform to the Anglo-Saxon model has been
under attack (Jacoby, 2000). Thus, there has been a more or less clear tendency of a
convergence towards the Anglo-Saxon system (Siems, 2010), but for many authors this
convergence is still far off, and maybe it never will be achieved (Palmer, 2011; Jacoby,
2000; Clarke, 2016; Otten et al., 2006), especially after the last financial crisis (Siems,
2010). For many other authors the convergence is not towards the shareholder oriented
model but it will be towards a hybrid model that will take elements from both the main
models (Aguilera and Jackson, 2010; Siems, 2010).
An important and useful insight is offered by Branson (2001). He states that there is
a convergence in corporate governance structure and practices of larger companies. This
is because the bigger and, especially, international corporations “feel considerable pressure
to adopt the best of such practices and structures gleaned from a global inventory”
(Branson, 2001: 324). This is an important academic focus on the similarities that big
companies around the world are going to adopt. In addition, his concept of convergence is
different from the other authors because he refers to convergence as a limited
phenomenon instead of a massive global one. In fact, he states that academic studies that
22
sustain the convergence effect in corporate governance are focused only on the US, Japan
and Europe.
However, today’s world comprises many effervescent new economies such as nations
from Asia, Africa and South America. They are characterized by the importance of their
own culture and economic systems and are, therefore, difficult to change and converge
towards a new system (Branson, 2001). He also sustains an idea of convergence in specific
areas “such as financial accounting or disclosure standards” rather than a total
convergence (Branson, 2001: 362).
In terms of reaching a final conclusion, it can be seen that convergence is an
extremely complex debate with totally different opinions. Moreover, the concept of
convergence has many different variables and it is unlikely a clear total trend will emerge.
Also, as stated by Gilson (2001: 34) perhaps “there can be no general prediction of the
mode that convergence of national corporate governance institutions may take”. To
forecast so exactly could be so difficult.
1.5 Research proposition
The literature review on corporate ownership and corporate control has led to the
conclusion that there is a controversy in whether there is convergence or not in corporate
governance models in today’s globalized business world. The issue of corporate control,
and occasionally ownership, in Europe is specifically illustrated in the book The control of
corporate Europe edited by Barca and Becht (2001). They collected the work of many
researchers related to different numerous countries in Europe, as detailed previously.
This study, however, will focus solely on research on the most economically important
countries in Europe: Germany, France, Italy, Spain and the UK. In particular, it will analyse
the ownership structure of all the companies listed in the main stock indexes. These
companies are called blue chip firms.
The aim of this analysis is to consider the current situation of ownership in blue chip
companies in order to see if there is a convergence towards the Anglo-American corporate
23
governance structure or if these firms maintain the particularity of the other model of
corporate governance characterized by concentrated ownership.
It is expected that the analysis will find these major companies of similar structure,
as argued by Branson (2001), characterized mainly by widespread ownership and owned
principally by institutional investors, even if they stem from different countries follow
different traditional models of corporate governance. Thus, the important role of
institutional investors and especially of international and foreign capitals form foreign
investment funds is envisaged. The validity of these ideas and predictions will be then be
checked.
24
2 Methodology
La Porta et al. (1998; 1999) analyse the ownership structure of the largest 20 companies
in 27 countries. They also try to detect the control structure but, as argued by Becht and
Mayer (2001), the analysis of control was rudimentary and they sometimes confused the
notions of ownership and control. Similarly, Roe (2000) analyses how the largest 20 public
firms in many countries of the world are owned and if they are widely held or not. Becht
and Mayer (2001) state that detecting and analysing the full intricate nature of control in
the firms is extremely complex because of the lack of transparency and the use of
mechanisms such as pyramid structures. Moreover, it is almost impossible to unearth the
real control situation for a large number of companies. Thus, if the control was analysed,
the sample of study would be so limited and, moreover, it would not inform so much about
convergence in corporate governance.
For these reasons, taking the example of La Porta et al. (1998, 1999), Roe (2000),
Faccio and Lang (2002) and for some countries from Barca and Becht (2001), it has been
decided to focus on the ownership and analyse the ownership structure even if this does
not explain the companies’ control. Also, it has to be noted that in countries such as the
UK, where there is the practice of one share one vote, ownership laps perfectly with the
control, assuming the absence of pyramid structures.
Understanding the ownership structure is the first important piece of information
required to become acquainted with a company and to understand their internal dynamics.
Furthermore, the literature related to the different systems in corporate governance and
the convergence theory in corporate governance refers to ownership: either dispersed
ownership or concentrated ownership. To summarise, corporate ownership is an important
concept, and it is important to try to simplify difficult matters in research.
As mentioned earlier, it has been decided to focus the research solely on Europe
without taking other countries in the world into account. This is because European
countries, and especially Western European countries, are similar in terms of history,
tradition, development, politics, culture and values. On the other hand, nations such as
India, Korea and China have totally different characteristics and variables that influence
25
the ownership structure (Claessens et al., 2000). Thus it would be difficult to compare and
fully understand the convergence, or the lack of it, in such different situations.
Furthermore, to further narrow the research only specific countries in Europe have
been selected: Germany, France, Italy, Spain and the UK. Those specific countries were
because they are the most relevant in the literature as they mainly represent the different
systems of corporate governance and also because they are the most important countries
in Europe from an economical point of view. In fact, according to Eurostat (n.d.) and World
Bank (n.d.) from an overall GDP of 14,635 billion euro in 2015 for the 28 E.U. countries
(without considering the Brexit phenomenon) these five countries alone account for
71.79% (10,507/14,635) of that total GDP. More specifically, Germany accounts for 3,033
billion euro, France for 2,181 billion euro, Italy for 1,636 billion euro, Spain for 1,081 and
the UK for 2,576 billion euro (Eurostat n.d.; World Bank, n.d.).
To further focus the research, it has then been decided to only analyse the main stock
market index in every of those countries, containing the most capitalized companies, also
defined as blue chips. Specifically, the ownership structure of all the companies listed in
the German DAX 30, in the French CAC 40, in the Italian FTSE MIB, in the Spanish IBEX
35 and in the British FTSE 100 will be analysed. However, the stock index Euro Stoxx 50,
which contains the biggest European firms, will not be considered. This is because it
contains a mix of companies from various European countries and thus it is not possible to
analyse the specific particularities of corporate ownership in single countries in order to
make comparison with the others.
It is important to underline again that the aim of this research is to analyse the
ownership structure in the most capitalized companies in Germany, France, Italy, Spain
and the UK, with the aim to compare the results and see if they are similar and thus if
there is a convergence in the corporate governance systems.
Moreover, these focus filters will be applied because almost all the convergence
studies keep their analysis general, discussing general convergence trends or general non-
convergence trends in corporate governance around the world. However, there are also
great differences between companies within the same country. The business environment
26
is characterized by the presence of many different types of firms of different sizes and
characteristics. Thus, try to find an overall convergence it is probably not the best
approach. In fact, the convergence process is gradual, and it is not always so clear-cut. It
is, therefore, important to compare similar types of companies in order to obtain a clearer
overview of the evolution of the phenomenon.
For example, Branson (2001) identifies the likely convergence in big firms, because
the common factor in these types of firms is the stock market. However, the dynamics in
small firms are totally different. A general analysis on convergence maybe does not allow
for explanation and detection in the differences that characterize different categories of
companies. Therefore, due to these different characteristics between small and large firms,
it is felt more worthwhile to analyse them differently in order to see if there is convergence
of not. Without using this focus, the risk of misleading could become an issue.
2.1 Data
The ownership data was downloaded by Bloomberg. In fact, Bloomberg Terminal provides
a wide list of shareholders for all the companies studied. After that, the data was cross-
checked with the database of Standard Ethics Ltd (http://www.standardethics.eu/), a
sustainability rating agency which also focuses on corporate governance analysis. This
allowed for a verification of the data in order to eliminate eventual errors. Bloomberg has
been chosen because it contains the whole list of shareholders (excluding of course the
floating shares owners) and, furthermore, these data were easy and fast to download.
2.2 Methodology of data analysis
After having downloaded the data to Excel, various forms of analysis were undertaken in
order to gain a deeper understanding of the ownership situation and the consequent
evaluation about the convergence.
Initially, taking the example from Barca and Becht (2001) and in particular from
Agnblad et al. (2001), the major 10 shareholders for every company in every selected
index were taken (for example, all 10 shareholders of all the companies in the DAX 30),
27
and the maximum and minimum value of those were calculated to obtain an idea of the
breadth of the range. Then the median and the mean values of the ownership for the first
10 shareholders of every company were calculated. The aim of these calculations was to
analyse the ownership situation and related characteristics of every single country (country
by country).
After that, similar to Barca and Becht (2001), Goergen and Renneboog (2006) and
Da Silva et al. (2004), a general summary table and graph including the average size of
the ownership for the major 10 shareholders in all the countries was constructed. Then,
another graph was made focusing only on the largest shareholder. All these graphs allow
for a comparison between the data of the different countries.
Then, taking inspiration from Goergen and Renneboog (2006), an analysis of the
shareholders holding more than 25% of ownership was done. More precisely, it was done
in two ways: first, by counting only the largest shareholders with ownership exceeding
25%, then relate that number obtained with the total companies in the index in order to
see the percentage of companies with more than 25% in the index. Second, by counting
all the shareholders, not only the first, with ownership greater than 25%. This is to obtain
a general idea of the numbers of shareholders holding more than 25%.
After that, the frequency was analysed. Following the examples of Gugler et al.
(2001) and Bloch and Kremp (2001), the ownership was split into ranges of 10%, from
0% to 100% (e.g. 0-10%; 10-20% and so on). It was then calculated to see how many of
the largest shareholders fell into which range. The aim of this was to see which the most
frequent range of ownership is. As usual, the analysis was conducted for both single
countries, in order to identify the specific characteristics of the single country, and all the
countries together, in order to compare the results between the countries.
Similar to Barca and Becht (2001), a detailed analysis on the types of shareholders
was carried out. This was focused only on the largest shareholders, and the investors were
classified as: institutional investors (such as mutual funds, pension funds, investment
advisors, hedge funds, insurance companies), government, foundations, individuals and
families, holding companies and trusts, banks, corporations. In this sense, the data
28
downloaded from Bloomberg were improved by internet research in the cases of
unclassified shareholders or ambiguous classifications. The number of largest shareholders
belonging to a specific class was analysed in to see which the most important type of
investors in a specific country are. Also in this case, this analysis and the consequent
graphs was applied to both single countries and on a more general level with all the
countries. Furthermore, from the number of investors belonging to the various classes, the
percentages of the weight of a specific type of investors on the total was analysed in order
to attain the importance. Also, a brief focus on the nationalities of investors and on the
name of the most frequent investors was given so that the presence of foreign capital in
the firms of a specific index could be identified.
Finally, in trying to address the research question on convergence, a statistical
analysis on the average of the largest shareholders in every one of the 5 indexes was done.
It was chosen to focus on an analysis of the largest shareholders because it can be assumed
that, from the major shareholder, it is possible to ascertain if the ownership of a company
is widely held or concentrated. In fact, the aim is to see if the ownership structure in the
5 countries analysed is similar or not in terms of being widely-dispersed or concentrated.
In other words, if the 5 groups are statistically different or not. In practical terms, the data
of the first shareholders of all the firms of all the countries was inserted in SPSS in order
to run a one-way ANOVA test. More precisely, a post-hoc Scheffe test was used with a
significant value (alpha) of 0.05 so as to see which specific groups differ.
It has to be noted that in the literature of convergence in corporate governance no
one has undertaken this specific quantitative investigation with statistical analysis.
However, it could be a much more reliable way of detecting similarities or differences in
comparable companies in different countries, in order to arrive at a conclusion from a
statistical point of view. A statistical analysis on the similarities or differences of companies
could be a new approach in evaluating if there is convergence or not in corporate
governance systems.
Everything will be shown and analysed in detail in the next section.
29
3 Data analysis
In this part, all the output graphs and tables mentioned in the methodology are displayed.
Sequenced logically, the main trends and the particularities of the ownership per country
will be analysed. Then all the data will be collated together in order to gain a complete
overview, and to be able to compare the differences between the countries. Finally, the
statistical analysis will be presented with the aim of detecting if these 5 groups of countries
are similar or not. That is, if convergence in the structure of corporate governance
ownership exists or not.
3.1 Germany
Figure 1 is a general graph showing the maximum value, minimum, median and mean for
the major ten shareholders in the DAX 30 companies. The largest shareholder with the
highest value of ownership (maximum) holds 51%, the second shareholder 16.75% and
the third 12.55% while, respectively, the minimum values are 4.60%, 2.41% and 1.41%.
It has to be noted that in this case, as well in the others, negative minimum values of
ownership, such as for the fifth shareholder -2.59%, are due to short positions held by
some investors.
-5
0
5
10
15
20
25
30
35
40
45
50
55
Largest 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
% o
f o
wn
ersh
ip
Shareholders
Figure 1 DAX 30 ownership data
Maximun Median Mean Minimum
30
Figure 2 focuses on the important data of median and, above all, mean. On average,
the largest shareholder holds 13.89% of the company shares. The second owns, on
average, 6.34%, the third 3.95%, the fourth 2.68% and from the fifth to the tenth the
ownership is under 2%. It is important to note that the median for the largest shareholder
is 8.17%, a value that is dramatically different to the mean value of 13.89%. When the
mean is greater than the median, the distribution is asymmetric and the majority of data
are smaller than the mean. Moreover, in this case, the mean is lifted by the presence of
three companies with a high ownership concentration, with 51%, 35.99% and 31.51%
respectively.
In terms of frequency, Figure 3 indicates that 17 of the 30 largest investors in the
DAX 30 own a range of shares of 0-10%. 6 of the 30 own shares between 10% and 20%
and only 4 of the largest shareholders fall into the range of 20-30%. However, there are 2
cases in which the major shareholders own between 30% and 40% and even one who, as
seen before, owns between 50% and 60% of the company shares.
0
2
4
6
8
10
12
14
Largest 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
% o
f o
wn
ersh
ip
Shareholders
Figure 2 DAX 30 median and mean data
Median Mean
31
With regards the types of investors (Figure 4), focusing only on the largest
shareholders in the DAX 30 companies, institutional investors are the most common
shareholders. In fact, they are the largest investor in 13 of the 30 companies. Also, as the
largest shareholder in 6 companies, the government plays an important role. Finally, it is
important to note that individuals and families are the major shareholder in 5 firms, and
holding companies and trusts in 3. However, holding companies and trusts are usually also
owned by a family.
0
2
4
6
8
10
12
14
16
18
0-10% 10-20% 20-30% 30-40% 40-50% 50-60% 60-70% 70-80% 80-90% 90-100%
Freq
uen
cy
Largest shareholders
Figure 3 Frequency of ownership in DAX 30
0
2
4
6
8
10
12
14
Institutionalinvestors
Government Foundations Individuals andfamilies
Holdingcompanies and
trusts
Banks Corporations
Nu
mb
er o
f in
vest
ors
Types of investors
Figure 4 Types of largest investors in DAX 30
32
In terms of nationalities of investors, and once again only focusing on the largest
shareholders, 14 stem from Germany and 11 from the US. Moreover, it has to be noted
that BlackRock is the largest shareholder in 8 of the 30 companies.
3.2 France
In France, in the CAC 40, (Figure 6) the shareholder with the most concentrated ownership
(maximum value) holds 53.27%, while the largest shareholder with the minimum value
holds 4.97%. Thus, the other largest shareholders hold 16.36% on average. The maximum
value for the second shareholder is 23.16% and 13.66% for the third. On the other hand,
the minimum value for the second shareholder is 1.32%. The proportion decreases
substantially from the third shareholder to the tenth.
0
2
4
6
8
10
12
14
16
United States Germany Norway Kuwait Canada Belgium Qatar
Nu
mb
er o
f in
vest
ors
Countries
Figure 5 Location of largest investors in DAX 30
33
In terms of the median and mean of ownership in the CAC 40, Figure 7 shows the
average ownership for the first shareholders is 16.36%, with a median value of 11.31%.
The second holds 6.92% on average with a related median of 5.61%.
Figure 8 indicates that 30 of the 40 largest shareholders in CAC 40 hold an amount
of shares below 20%. Specifically, 15 of the 40 largest investors hold an amount of shares
between 0-10% while the next 15 of the 40 hold an amount between 10-20%. Of the less
-5
0
5
10
15
20
25
30
35
40
45
50
55
Largest 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
% o
f o
wn
ersh
ip
Shareholders
Figure 6 CAC 40 ownership data
Maximum Median Mean Minimum
0
2
4
6
8
10
12
14
16
18
Largest 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
% o
f o
wn
ersh
ip
Shareholders
Figure 7 CAC 40 median and mean data
Median Mean
34
widespread companies, 2 companies have the largest shareholder owning between 40%
and 50%, while only one shareholder owning shares in a range of 50-60% in the CAC 40.
In the French CAC 40, (Figure 9) institutional investors are the most common type
of largest shareholders, such is the case in 14 of the 40 companies. Also, in France, the
role of the government as the largest owner in CAC 40 firms is prominent. In fact, it is the
largest owner in 8 firms. Holding companies are the main shareholder in 9 firms, while
individuals and families hold that honour in 2.
0
2
4
6
8
10
12
14
16
0-10% 10-20% 20-30% 30-40% 40-50% 50-60% 60-70% 70-80% 80-90% 90-100%
Freq
uen
cy
Largest shareholders
Figure 8 Frequency of ownership in CAC 40
0
2
4
6
8
10
12
14
16
Institutionalinvestors
Government Foundations Individualsand families
Holdingcompaniesand trusts
Banks Corporations
Nu
mb
er o
f in
vest
ors
Types of investors
Figure 9 Types of largest investors in CAC 40
35
Figure 10 illustrates how 22 of the 40 companies have their largest investor hailing
from France. In 10 firms the main investor is from the US. It is interesting to underline
that the American investment management corporation BlackRock is the major shareholder
in 8 companies and the French state plays this role in 6.
3.3 Italy
The Italian FTSE MIB, the index that comprises 40 Italian blue chip companies, seems to
be characterized by less widespread ownership. In fact, the maximum percentage of shares
held by the largest shareholders is 64.70% and a minimum value of 4.02%. This means
that not one of the largest shareholders holds less than 4.02%. The maximum value for
the second shareholders is 26.44% and the minimum is 1.92%. It is important to note that
from the third to the tenth shareholder the minimum value is negative, meaning that these
involve short selling practices.
0
5
10
15
20
25
United States France Belgium Canada Jersey Switzerland China
Nu
mb
er o
f in
vest
ors
Countries
Figure 10 Location of largest investors in CAC 40
36
In the FTSE MIB, as shown by Figure 12, the median and the mean values are very
close to each other. This means that there is an almost symmetric distribution, and the
mean is nearly in the middle, having similar amount of data on the right and on the left.
The largest shareholders of these 40 firms hold 29.49% of shares on average, with a
median value of 28.25%. The second shareholders hold a mean percentage of 6.77% of
ownership, with a median of 4.99%. From the third to the tenth, shareholders hold an
ownership percentage of below 3% on average.
-5
0
5
10
15
20
25
30
35
40
45
50
55
60
65
Largest 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
% o
f o
wn
ersh
ip
Shareholders
Figure 11 FTSE MIB ownership data
Maximum Median Mean Minimum
37
In the Italian FTSE MIB, (Figure 13) 10 of the 40 firms have the largest owner holding
shares between 0 and 10%. The most frequent range of ownership for the largest
shareholders is between 20-30%, in which the major shareholders of 12 firms fall. It has
to be noted that in many firms the largest shareholder holds a great amount of shares,
consequently leading to concentrated ownership. In fact, in 5 firms, the major shareholder
owns shares between 30-40%, in 3 firms between 40-50% and in 6 firms between 50-
60%. Furthermore, in 3 of the 40 firms, the largest owner holds shares in a range of 60-
70%.
0
5
10
15
20
25
30
Largest 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
% o
f o
wn
ersh
ip
Shareholders
Figure 12 FTSE MIB median and mean data
Median Mean
38
Regarding the types of investors, institutional investors are the major shareholder in
8 of the 40 companies. The government holds a similar number, which indicates its
important role. Holding companies and trusts are the largest owner in 9 companies in the
FTSE MIB and other corporation in 12 companies. These last two data indicate the
importance of the families as investors through mechanisms such as holding companies
instead of holding shares directly as private investors.
Figure 15 shows the supremacy of Italian largest shareholders in 27 of the 40
companies, followed by Luxembourg with 4 firms, where many holdings are domiciled for
fiscal reasons. More in detail, BlackRock is the first shareholder only in 2 firms, while Exor
0
2
4
6
8
10
12
14
0-10% 10-20% 20-30% 30-40% 40-50% 50-60% 60-70% 70-80% 80-90% 90-100%
Freq
uen
cy
Largest shareholders
Figure 13 Frequency of ownership in FTSE MIB
0
2
4
6
8
10
12
14
Institutionalinvestors
Government Foundations Individuals andfamilies
Holdingcompanies and
trusts
Banks Corporations
Nu
mb
er o
f in
vest
ors
Types of investors
Figure 14 Types of largest investors in FTSE MIB
39
SpA is the first shareholder in 3 firms. Exor SpA is the holding company of the Agnelli
family.
3.4 Spain
In the Spanish IBEX 35, Figure 16 shows that the largest shareholder owning the maximum
level of shares has 70.10%, while the largest owning the minimum amount of shares
amounts to 4.94%. The maximum value for the second shareholder is 30% and the
minimum is 0.91%. From the third to the tenth, the maximum value decreases from
11.70% to 2.23%, while the minimum values are almost always negatives.
0
5
10
15
20
25
30
United States France Italy Germany Luxembourg Netherlands UnitedKingdom
Nu
mb
er o
f in
vest
ors
Countries
Figure 15 Location of largest investors in FTSE MIB
40
In terms of the median and mean (Figure 17), it can be seen that the largest
shareholders hold, on average, 25.51% of shares for a related median value of 20%. The
second holds a mean ownership of 7.13%. The average percentage of ownership decreases
to under 4% from the third shareholder to the tenth.
-5
0
5
10
15
20
25
30
35
40
45
50
55
60
65
70
Largest 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
% o
f o
wn
ersh
ip
Shareholders
Figure 16 IBEX 35 ownership data
Maximum Median Mean Minimum
0
5
10
15
20
25
30
Largest 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
% o
f o
wn
ersh
ip
Shareholders
Figure 17 IBEX 35 median and mean data
Median Mean
41
Figure 18 shows that in terms of frequency, largest shareholders hold less than 10%
of total shares in 11 out of the 35 companies. 7 companies own a range of shares between
10-20%, 5 between 20-30% and 4 between 30-40%. However, 8 companies of the 35
display concentrated ownership with 5 firms having the major shareholder owning a range
of 50-60%, 2 between 60-70% and 1 over 70%. The latter refers to the case of the
previously seen maximum value of 70.10%.
With regards the largest shareholders, IBEX 35 has 9 largest shareholders of the 35
classified as institutional investors and 6 as the government. It is important to note the
role of corporations owning other companies, where in 7 of the 35 companies these are
the major shareholders. Banks are the main investor in 6 firms. The importance of families
is also clear as individuals and families are the major shareholders in 4 firms and holdings
in 2 firms.
0
2
4
6
8
10
12
0-10% 10-20% 20-30% 30-40% 40-50% 50-60% 60-70% 70-80% 80-90% 90-100%
Freq
uen
cy
Largest shareholders
Figure 18 Frequency of ownership in IBEX 35
42
In terms of nationality of these investors, it seems to show a nationalistic
characteristic, with 22 of the 35 major investors from Spain, followed by the US in only 3
companies. The rest of the major shareholders in IBEX 35 are dispersed worldwide.
0
1
2
3
4
5
6
7
8
9
10
Institutionalinvestors
Government Foundations Individualsand families
Holdingcompaniesand trusts
Banks Corporations
Nu
mb
er o
f in
vest
ors
Types of investors
Figure 19 Types of largest investors in IBEX 35
0
5
10
15
20
25
UnitedStates
Spain Italy Norway Canada Colombia Jersey Netherlands UnitedKingdom
Qatar
Nu
mb
er o
f in
vest
ors
Countries
Figure 20 Location of largest investors in IBEX 35
43
3.5 UK
The British FTSE 100 lists some of the world’s major publically-listed firms. Here, the
largest shareholder with the maximum ownership holds 74.99%, while the largest with the
minimum holds 4.87%. The second shareholder with the maximum amount of shares holds
23.51% while the minimum is 2.48%.
Figure 22 shows that the largest shareholder holds on average 13.87% and the
related median value is 9.51%. The second shareholder holds a mean percentage shares
of 6.88% and the third 4.69%. From the fourth to the tenth shareholder, the percentage
held is below 4%. The median value is different, as described, for the largest shareholder,
but from then on the mean and median values are close.
-5
5
15
25
35
45
55
65
75
Largest 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
% o
f o
wn
ersh
ip
Shareholders
Figure 21 FTSE 100 ownership data
Maximum Median Mean Minimum
44
In the FTSE 100 (Figure 23), 59 of 101 companies illustrate the largest shareholder
holding less than 10% of shares. In 24 firms, the major shareholder holds between 10-
20%, while the major shareholder has between 20-30% in 10 firms. Only a few companies
have a major shareholder owning more than 30%, but it has to be noted that 2 companies
have their largest shareholder owning between 70-80%. These are the cases of the mining
company Fresnillo plc, owned by the Mexican billionaire Alberto Baillères, and the Royal
Bank of Scotland, which was nationalised by the UK government in 2008.
0
2
4
6
8
10
12
14
Largest 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
% o
f o
wn
ersh
ip
Shareholders
Figure 22 FTSE 100 median and mean data
Median Mean
0
10
20
30
40
50
60
70
0-10% 10-20% 20-30% 30-40% 40-50% 50-60% 60-70% 70-80% 80-90% 90-100%
Freq
uen
cy
Largest shareholders
Figure 23 Frequency of ownership in FTSE 100
45
Figure 24 reports that institutional investors are the most numerous type of first
shareholder in the FTSE 100, being the largest shareholder in 71 companies of 101.
Individuals are the main shareholder in 5 firms while holding companies and trusts play
that same role in 11.
In terms of investor nationalities 57 of the largest shareholders of 101 companies in
the FTSE 100 are American. In this sense, BlackRock is the first shareholder in 37
companies. Only 18 largest investors are from the UK. This is somewhat different to the
other countries analysed to this point, where there was much more “nationalism”. The rest
of the investors are distributed around the globe.
0
10
20
30
40
50
60
70
80
Institutionalinvestors
Government Foundations Individualsand families
Holdingcompaniesand trusts
Banks Corporations
Nu
mb
er o
f in
vest
ors
Type of investors
Figure 24 Types of largest investors in FTSE 100
46
3.6 General analysis
Table 1 shows the average ownership for the ten major shareholders, classified according
to their index and nationalities. These data are graphically represented in Figure 26. From
those summaries, it is possible to detect and compare the main differences between the
countries. In fact, the mean ownership for the largest shareholders is almost similar for
the DAX 30 and the FTSE 100, where the values are 13.89% and 13.87% respectively.
Moreover, it is also close for the CAC 40, which has a value of 16.36%. On the other hand,
both FTSE MIB and IBEX 35 present a higher concentrated level of ownership with 29.49%
and 25.51% respectively. It seems that Germany, France and the UK present a similar
widely-dispersed ownership structure, while Italy and Spain have similar concentrated
ownership structures. Table 27 focuses solely on the average size of the largest
shareholders, so as to gain a clearer idea of the differences in the mean of ownership for
the most important shareholder.
The mean value of ownership for all the other shareholders from the second to the
tenth is almost similar. In fact, the second shareholder, on average holds 6.34% of the
shares in Germany, 6.92% in France, 6.77% in Italy, 7.13% in Spain and 6.88% in the
0
10
20
30
40
50
60
Nu
mb
er o
f in
vest
ors
Countries
Figure 25 Location of largest investors in FTSE 100
47
UK. From the third to the tenth shareholder, it is possible, thereafter, to note that Italian
shareholders hold a smaller average amount of shares than the other countries, while the
UK shareholders hold the greater average amount of shares in the group.
Table 1
Countries mean ownership comparison
Country Index Largest 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
Germany DAX 30 13.89 6.34 3.95 2.68 1.97 1.93 1.40 1.34 1.16 0.98
France CAC 40 16.36 6.92 4.28 2.82 2.23 1.92 1.60 1.38 1.17 0.98
Italy FTSE MIB 29.49 6.77 2.87 2.31 1.75 1.50 1.11 0.85 0.76 0.64
Spain IBEX 35 25.51 7.13 3.71 2.82 2.17 1.72 1.28 1.12 1.03 0.88
UK FTSE 100 13.87 6.88 4.69 3.72 3.12 2.75 2.42 2.08 1.91 1.69
0
5
10
15
20
25
30
Largest 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
% o
f o
wn
ersh
ip
Shareholders
Figure 26 Countries mean ownership data
Germany (DAX 30) France CAC 40) Italy (FTSE MIB) Spain (IBEX 35) UK (FTSE 100)
48
Figure 28 shows, on one hand, the number of largest shareholders holding shares of
excess of than 25%. On the other hand, the percentage with respect to the total firms in
the index. Going more into detail, just 4 major shareholders in the DAX 30 hold more than
25%. This means that only 13.33% of the DAX 30 has a largest shareholder with more
than 25% of ownership. The same logic applies to the other countries. In the CAC 40, there
are 8 major shareholders, constituting 20% of the index, owning more than 25%. In Italy
and Spain, there are 24 and 13 largest shareholders respectively owning more than 25%.
This equates to 60% of firms having a major shareholder with more than 25% of ownership
in the FTSE MIB, and 37.14% in the IBEX 35. Conversely, the UK only has 14 largest
shareholders with more than 25%, which only represents 13.86% of the FTSE 100. This
analysis also allows for a confirmation of what was previously stated: there seems to be a
tendency of concentrated ownership in the Italian FTSE MIB and in the Spanish IBEX 35,
while in the other indexes the opposite seems to hold true, that of widespread ownership.
0
5
10
15
20
25
30
Germany (DAX 30) France (CAC 40) Italy (FTSE MIB) Spain (IBEX 35) UK (FTSE 100)
% o
f o
wn
ersh
ip
Countries
Figure 27 Average size largest shareholder
Germany (DAX 30) France (CAC 40) Italy (FTSE MIB) Spain (IBEX 35) UK (FTSE 100)
49
Differing from the previous figure, Figure 29 indicates the total amount of
shareholders, and not only the largest, holding more than 25%. The number of
shareholders who hold more than 25% increases by one in Italy and by 2 in Spain. This
means that, in the indexes of those countries, there are also these second shareholders
who own more than 25%. Not one of the second shareholders in the other countries own
this amount.
0%
10%
20%
30%
40%
50%
60%
70%
0
5
10
15
20
25
30
Germany (DAX 30) France (CAC 40) Italy (FTSE MIB) Spain (IBEX 35) UK (FTSE 100)
% o
f co
map
nie
s w
ith
larg
est
shar
eho
lder
s >2
5%
Larg
est
shar
eho
lder
s h
old
ing
>25
%
Countires
Figure 28 Largest shareholders owning more than 25%
n° first shareholders >25% % of companies with first shareholders >25% on the total index
50
In order to compare the differences between the groups, Figure 30 displays the
frequency of range of ownership in relative values. Clearly, the UK and Germany seem to
have more of a widely-dispersed situation. In fact, they present 58.42% and 56.67%
respectively of companies in their indexes having the major shareholder owning less than
10% of shares. France occupies more of a middle position, having 37.5% of the largest
shareholders owning less than 10% and 37.5% owning between 10-20%. On the other
hand, Italy and Spain seem to present a situation of concentrated ownership. In fact, 30%
of the firms in Italy have the largest shareholders owning between 20-30%, 12.5% owning
between 30-40%, 7.5% in a range between 40-50%, 15% between 50-60% and 7.5%
between 60-70%. There is a similar trend in Spain, where nearly 50% of companies
present the largest shareholders with more than 20% of shares.
0
5
10
15
20
25
Germany (DAX 30) France (CAC 40) Italy (FTSE MIB) Spain (IBEX 35) UK (FTSE 100)
Tota
l sh
areh
old
ers
>25
%
Countries
Figure 29 Total shareholders owning more than 25%
Germany (DAX 30) France (CAC 40) Italy (FTSE MIB) Spain (IBEX 35) UK (FTSE 100)
51
Once again, so as to more accurately compare different indexes with different number
of firms, the relative values should be compared which Figure 31 does. This shows the
percentage of firms in the total index who have a specific type of investor as their largest
shareholder. Institutional investors are clearly the most important class in Germany and
the UK. In fact, 43.33% of the companies in the German DAX 30 have an institutional
investor as the major shareholder. In the British FTSE 100, this percentage rises to 70.3%
of the firms. In the French CAC 40, institutional investors lead the way in 35% of the firms,
in 25.71% of firms in the Spanish IBEX 35 and in the Italian FTSE MIB, in only one firm
out of 5 (20%). The government as major shareholder is almost equally important in every
country. In Germany, France and Italy it is the largest shareholder in 20% of the
companies. In Spain, the figure decreases slightly to 17.14% and in the UK, this percentage
decreases sharply to 6.93%. Individuals and families are relevant in Germany and Spain,
where they are the largest investors in 16.67% and 11.43% respectively of the firms.
Thereafter, holding companies and trusts are particularly important in France and Italy,
where they are the main shareholder in 22.5% of the companies in both the CAC 40 and
0%
10%
20%
30%
40%
50%
60%
70%
0-10% 10-20% 20-30% 30-40% 40-50% 50-60% 60-70% 70-80% 80-90% 90-100%
Freq
uen
cy in
%
Largest shareholders
Figure 30 Frequency of ownership comparison relative values
Germany (DAX 30) France (CAC 40) Italy (FTSE MIB) Spain (IBEX 35) UK (FTSE 100)
52
the FTSE MIB. Banks are relatively important investors in Spain, where they are main
investors in 17.14% of the companies in the IBEX 35. Finally, other corporations are the
main shareholders in Italy in 30% of the firms and in 20% of the companies in Spain. It is
important to underline that even if individuals and families do not directly hold ownership
of companies, they are usually behind holding companies, trusts or other corporations.
Thus, in the nations with a significant proportion of holding companies or corporations, the
role of individuals and families is probably as important as that of investors and
shareholders.
It is important to underline the prominent role of BlackRock as a shareholder. In fact,
this analysis has considered 5 indexes from 5 major economic countries meaning that a
total amount of 246 firms have been taken into account for this analysis. Of those,
BlackRock is the major shareholder in 57, which is equivalent to the 23.17%. Practically,
almost one quarter of the companies in these blue chip companies has BlackRock as a
largest investor.
0%
10%
20%
30%
40%
50%
60%
70%
80%
Institutionalinvestors
Government Foundations Individuals andfamilies
Holdingcompanies and
trusts
Banks Corporations
% o
f im
po
rtn
ace
on
th
e to
tal
Types of investors
Figure 31 Types of largest shareholders in relative values
Germany (DAX 30) France (CAC 40) Italy (FTSE MIB) Spain (IBEX 35) UK (FTSE 100)
53
3.7 Statistical analysis
A new method of detecting the convergence is introduced in this research. In fact,
compared to other pieces of research by other authors, it is the first time that statistical
tools are used to identify the existence or not of convergence in the ownership structure
and, thus, in the corporate governance system. The hypotheses are described below in
Table 2.
Table 2 Hypothesises
Null hypothesises Alternative hypothesises
H01: μ Germany = μ France H11: μ Germany ≠ μ France
H02: μ Germany = μ Italy H12: μ Germany ≠ μ Italy
H03: μ Germany = μ Spain H13: μ Germany ≠ μ Spain
H04: μ Germany = μ UK H14: μ Germany ≠ μ UK
H05: μ France = μ Italy H15: μ France ≠ μ Italy
H06: μ France = μ Spain H16: μ France ≠ μ Spain
H07: μ France = μ UK H17: μ France ≠ μ UK
H08: μ Italy = μ Spain H18: μ Italy ≠ μ Spain
H09: μ Italy = μ UK H19: μ Italy ≠ μ UK
H010: μ Spain = μ UK H110: μ Spain ≠ μ UK
As usual, the name of the country is only there to simplify understanding, because
in reality the specific index of the blue chips for every one of these countries was used and
tested. More precisely, the H01 (null hypothesis) is: the mean of ownership for the largest
shareholders in the German DAX 30 is equal to the mean of ownership for the largest
shareholders in the French CAC 40, and so on for the other hypotheses. Instead, H1
(alternative hypothesis) is the opposite of H0, thus the mean between two groups is
different.
A one-way ANOVA was used to see if the mean difference of share ownership between
the various indexes is ‘0’, which means they are equal, or not. The data was inserted on
SPSS and ownership was set up as a dependent variable and the countries as an
independent variable (factor). Table 3 shows the descriptive analysis of the ownership
54
across the countries. It describes the number of firms analysed for every country (which
is the number of firms included in the main index), the mean values, standard deviations,
maximum and minimum values and other data. Confirming what was stated in the previous
section, the German average seems to be similar to that of the UK, that is, of widespread
ownership. France occupies a mid-position, but closer to Germany and the UK. Then, Italy
and Spain with the higher mean values seem to be characterized by more concentrated
ownership. However, this is according to expectations. The statistical test was needed to
see if this expectation is statistically true or not.
Table 3 Descriptives
Ownership
N Mean Std. Deviation Std. Error
95% Confidence Interval for Mean
Minimum Maximum Lower Bound Upper Bound
Germany 30 13.8873 11.02512 2.01290 9.7705 18.0042 4.60 51.00
France 40 16.3610 12.59448 1.99136 12.3331 20.3889 4.97 53.27
Italy 40 29.4893 18.51090 2.92683 23.5692 35.4093 4.02 64.70
Spain 35 25.5080 20.22775 3.41911 18.5595 32.4565 4.94 70.10
UK 101 13.8723 13.23080 1.31651 11.2604 16.4842 4.87 74.99
Total 246 18.4736 16.16563 1.03068 16.4435 20.5037 4.02 74.99
The first step is the test of homogeneity of variances, which is reported in Table 4.
Ideally, it is better to have a non-significant result for this test (in other words, to obtain
Sig. value greater than 0.05), which means that the variances between these groups are
equal. Instead, in this case, the Sig. is lower than the alpha selected of 0.05. Thus, this
indicates that there is a difference in the variances across the countries, which could also
be expected due to the differences in the standard deviations in Table 3. This assumption
of ANOVA is not met, but it is possible to proceed with the analysis whilst considering the
ANOVA results carefully.
Table 4 Test of Homogeneity of Variances
Ownership
Levene Statistic df1 df2 Sig.
6.785 4 241 .000
55
Table 5 reports the results of the ANOVA test. The H0 is that the mean of ownership
of the largest shareholders is equal across the countries. The mean square indicates the
variability, and it is possible to see that the variance is definitely higher between groups
rather than within. The consequence of this is a high F-statistic which is related to a Sig.
of .000. Because of this, the null hypothesis is rejected with the conclusion that the average
ownership of the largest shareholders differs across the countries.
Table 5 ANOVA
Ownership
Sum of Squares df Mean Square F Sig.
Between Groups 9533.607 4 2383.402 10.541 .000
Within Groups 54491.649 241 226.106
Total 64025.255 245
At this point, the ANOVA test individuated a statistical difference in the ownership
between the groups, but it does not specify which of those groups differ. To see this detail,
a Scheffe post-hoc test (with alpha 0.05) was used. Table 6 reports the output with all the
possible combinations. This test allows for a detailed answer to the null hypothesises
described in Table 2.
From this, it is possible to reject H02, H03, H05, H09 and H010, because the Sig. value
of those is smaller or equal to the alpha of .05. This means that the related alternative
hypothesis H1 is true for those countries and, thus the mean of ownership for the largest
shareholders between Germany and Italy, Germany and Spain, France and Italy, Italy and
the UK, Spain and the UK are statistically different. On the other hand, it is not possible to
reject H01, H04, H06, H07, H08 because the Sig. values are greater than .05. This means
that may, therefore, be true the null hypothesises and the mean between Germany and
France, Germany and the UK, France and Spain, France and the UK, Italy and Spain are
not statistically different.
An interesting result is the similarity between France and Spain.
56
Table 6 Multiple Comparisons
Dependent Variable: Ownership
Scheffe
(I) Countries (J) Countries
Mean Difference
(I-J) Std. Error Sig.
95% Confidence Interval
Lower Bound Upper Bound
Germany France -2.47367 3.63174 .977 -13.7475 8.8002
Italy -15.60192* 3.63174 .001 -26.8758 -4.3281
Spain -11.62067* 3.74127 .050 -23.2345 -.0068
UK .01506 3.12659 1.000 -9.6907 9.7208
France Germany 2.47367 3.63174 .977 -8.8002 13.7475
Italy -13.12825* 3.36234 .005 -23.5658 -2.6907
Spain -9.14700 3.48035 .145 -19.9509 1.6569
UK 2.48872 2.80915 .940 -6.2316 11.2090
Italy Germany 15.60192* 3.63174 .001 4.3281 26.8758
France 13.12825* 3.36234 .005 2.6907 23.5658
Spain 3.98125 3.48035 .860 -6.8226 14.7851
UK 15.61697* 2.80915 .000 6.8966 24.3373
Spain Germany 11.62067* 3.74127 .050 .0068 23.2345
France 9.14700 3.48035 .145 -1.6569 19.9509
Italy -3.98125 3.48035 .860 -14.7851 6.8226
UK 11.63572* 2.94938 .004 2.4801 20.7914
UK Germany -.01506 3.12659 1.000 -9.7208 9.6907
France -2.48872 2.80915 .940 -11.2090 6.2316
Italy -15.61697* 2.80915 .000 -24.3373 -6.8966
Spain -11.63572* 2.94938 .004 -20.7914 -2.4801
*. The mean difference is significant at the 0.05 level.
Table 7 shows a general summary of the Scheffe results. It reports the mean values
of the groups split into different columns (subsets). These confirm the previous results of
Table 6, which indicate that the UK, Germany and France (under subset 1) do not
statistically differ, as well as France and Spain in subset 2. Italy and Spain, under subset
3, do not statistically differ from each other.
As mentioned before, the result regarding the similarity between France and Spain is
interesting. It puts France in a mid-position between the universe of indexes with
widespread ownership and indexes with concentrated ownership. Spain is in a similar
position, which is similar to Italy but it is also similar to France. It could be interpreted as
57
a tendency of convergence of France towards widespread models and a convergence of
Spain from the concentrated ownership model towards a middle system as that of France.
France is more similar to Germany and the UK, and Spain is more similar to Italy. However,
both tend to converge towards subset 1.
Running the Tukey HSD post-hoc test, the multiple comparison table presents the
same results. However, the summary table (Table 8) presents a slightly different output.
In fact, despite average ownership not being statistically different in France and Spain, it
presents just two subsets: the UK, Germany and France under subset 1, and Spain and
Italy under subset 2. This means that this test considers France and Spain differently, not
so much in a mid-position between the two extremes but being part of the two extreme
groups.
However, it has to be considered that running these statistical tests always carries
the probability alpha, which here was set to .05, to commit an error of type I, which is to
reject H0 when H0 is true and a probability β to commit an error of type II, which is not
rejecting H0 even if it is false.
Table 7 Ownership (Scheffe)
Scheffea,b
Countries N
Subset for alpha = 0.05
1 2 3
UK 101 13.8723
Germany 30 13.8873
France 40 16.3610 16.3610
Spain 35 25.5080 25.5080
Italy 40 29.4893
Sig. .967 .111 .837
Means for groups in homogeneous subsets are displayed.
a. Uses Harmonic Mean Sample Size = 41.049.
b. The group sizes are unequal. The harmonic mean of the
group sizes is used. Type I error levels are not guaranteed.
Table 8 Ownership (Tukey HSD)
Tukey HSDa,b
Countries N
Subset for alpha = 0.05
1 2
UK 101 13.8723
Germany 30 13.8873
France 40 16.3610
Spain 35 25.5080
Italy 40 29.4893
Sig. .944 .752
Means for groups in homogeneous subsets are
displayed.
a. Uses Harmonic Mean Sample Size = 41.049.
b. The group sizes are unequal. The harmonic mean
of the group sizes is used. Type I error levels are not
guaranteed.
58
4 Results and discussion
As described in the literature review, the theory reports the existence of specific models of
corporate governance which characterize the different countries. Going into more detail,
the shareholder model in the UK, where widespread ownership is common as a
consequence of a developed capital markets and a high-level of legal shareholder
protection (Becht and Mayer, 2001; La Porta et al., 1998). The stakeholder model in
Continental Europe, characterized mainly by concentrated ownership and a strong focus
and relationship between employees and employers, such as in Germany (Becht and
Mayer, 2001; Jacoby, 2000; Vitols, 2001). Clarke (2016) describes also the Latin system,
present in France, Italy and Spain, where firms have concentrated ownership due to weak
legal protection but, different to that of the stakeholder system, it is characterized by
conflictual relations between workers and employers.
In this research, the focus was on the ownership structure of the main stock indexes
in Germany, France, Italy, Spain and the UK. The aim was to analyse the ownership
structure of the blue chip companies in those indexes and see if there are similarities and,
thus, a possible convergence in corporate governance systems.
What is extremely interesting are the results obtained by the German DAX 30
analysis. German businesses are usually described as concentrated in ownership, with
infrequent formal board meetings but frequent informal meetings due to the tie in the
relationship between employees, managers and the main shareholder (Roe, 2000). Becht
and Böhmer (2001) describe how even the DAX 30 firms usually present a relevant major
shareholder, and, traditionally, the primary role as investors is held by banks and families.
Moreover, they find that Allianz AG and Deutsche Bank AG are the main shareholders in
many cases. The results of this research indicate that DAX 30 firms are mainly
characterized by widely dispersed ownership, and the role of main shareholders is held by
institutional investors. Moreover, Allianz and Deutsche Bank are never the main
shareholders in DAX 30 companies. Also, the DAX 30 and the FTSE 100 present almost the
same average of ownership for the largest shareholder, 13.89% and 13.87% respectively.
In fact, in the statistical analysis, both the Germany and the UK are not considered as
59
statistically different. This means that the German blue chip companies have probably
converged towards the Anglo-American system.
Another interesting result is the position of France. As mentioned, Bloch and Kremp
(2001) describe a high level of ownership concentration even in the CAC 40. In fact, they
describe how the largest shareholders hold between 20-30% of shares on average, the
second shareholders hold between 5-10% and the third around 5%. Also, they argue the
importance of holding companies, banks, insurance companies and families as major
investors. In this research, it was seen that in the CAC 40 the average figure of ownership
for the largest shareholders is 16.36%, for the second shareholders it is 6.92% and for the
third 4.28%. In the comparison of the average ownership observed by Bloch and Kremp
(2001) and in this research, it appears that the results for the second and the thirds
shareholders are similar, and instead it is the result for the largest shareholders that is
different. In fact, in this research it seems as if the average of ownership has decreased
from 2001 to now: from between 20-30% to 16.36%. In terms of investors, this research
has also uncovered the important role of holding companies and, thus, both directly and
indirectly of families. Banks are the main shareholder in only 2 firms out of 40. Therefore,
they are not so relevant. In terms of statistical results, it seems that the largest companies
in France are characterized by a trend in convergence towards the Anglo-American system.
However, it also appears that France still occupies a mid-position between concentrated
ownership and widespread ownership. In fact, from Scheffe post-hoc test, France is not
statistically different from the UK and Germany but the Scheffe summary Table 8 indicates
France between the widespread countries but also in a middle position. On the other hand,
Tukey summary Table 9 shows France completely part of the widespread group. This
ambiguous output probably indicates that France has not yet completed its convergence.
For Italy, the findings in this research are similar to those of previous researches. In
fact, Bianchi et al. (2001) state that the Italian system is characterized by high ownership
concentration with a particularly relevant role for families and the state as investors. In
this research, the average ownership for the major shareholders in the FTSE MIB
companies is 29.49%. This is the highest of all the indexes taken into consideration for this
60
analysis. In terms of investors, this research confirms the previous findings of Bianchi et
al. (2001). In fact, the important role of the government and individuals and families,
towards holding companies and other companies, has been confirmed. Statistically, the
FTSE MIB is different from all the other indexes, except the IBEX 35.
The analysis of the Spanish IBEX 35 also shows some relevant findings. Crespí and
García-Cestona (2001) indicate that concentrated ownership also characterizes the
Spanish system. However, similar to France, this research indicates that Spain is in a mid-
position between widespread ownership and concentrated ownership. The IBEX 35
presents an average ownership for the largest shareholders of 25.51%, and therefore,
seems to be closer to the 29.49% of the Italian system. However, from a statistical point
of view, the Scheffe test indicates that Spain is statistically different from the UK and
Germany, but that it is similar to Italy and France. Interestingly, the statistical similarity
with the French system shows a possible tendency towards widespread ownership, even if
it is currently not the case. Also, it has to be considered that statistical tests carry margin
of errors. In fact, the summary Table 8 from Scheffe shows Spain with Italy in the
concentrated ownership countries, but also in a middle group with France. However,
according to Tukey summary Table 9 Spain is only part of the concentrated ownership
group.
With regards to the UK, the characteristics identified in the literature review are fully
confirmed. In fact, the result of this research also indicates the UK as having a widespread
system with the prevalent role of institutional investors as main shareholders. Moreover,
it is possible to note that, as Goergen and Renneboog (2001) state, the UK is characterized
by the presence of many listed companies in the blue chip index. In fact, the FTSE 100
presents 101 companies listed, while all the other indexes taken into consideration present
between 30 and 40 companies listed in the blue chips index.
In conclusion, it is possible to recognise a general tendency of convergence towards
the Anglo-American system characterized by widespread ownership. This convergence
trend is clear for the German blue chips, as previously identified by Hansmann and
Kraakman (2000), Sudarsanam and Broadhurst (2012), Krenn (2014), Lane (2003) and
61
Branson (2001). It appears that France is also moving towards this trend. However, some
ambiguous results could indicate that the convergence process is not yet complete. On the
other hand, Italy seems to be stuck in its traditional model characterized by concentrated
ownership. Spain seems to be closer to the Italian concentrated ownership, even if some
results indicate that in Spain blue chips are tending to converge to some degree towards
the shareholder model.
In general, this trend in convergence could be explained by the increased importance
of the financial markets and the success of Anglo-American multinational companies, which
have been considered as the international benchmark (Krenn, 2014). Also, Agnblad et al.
(2001) and Lane (2003) argue that the increased importance of international institutional
investors as main shareholders has pushed towards this structural change. All these
findings correspond to the description offered by Branson (2001) that the largest
corporations will converge in corporate governance structure and practices.
62
Conclusion
In recent years the debate about corporate governance convergence towards the
shareholder model, which is characterized by widespread ownership, has arisen following
the phenomenon of globalisation, the increased importance of financial markets and the
international success of Anglo-American multinational firms. This research supports that a
convergence in corporate governance structure towards the shareholder model seems to
exist in almost all of the countries analysed.
In the discussion, it was concluded that the ownership structure of German blue chips
is extremely similar to that of the UK, meaning the German blue chips are widespread
owned. The French blue chips seem to be close to achieving their convergence, even if
some ambiguous results indicate that it has not yet been completed. Spain also seems to
be on the way to convergence, even if it is still similar to the Italian system, which is
characterized by a high concentrated ownership and no tendency of convergence.
This discussion was conducted focusing only on ownership, without considering
control. However, control is also an important component in the companies’ corporate
governance. In terms of data, the ownership changes both rapidly and frequently,
especially for listed firms. Thus, it is probable that some downloaded data could be a little
different at this present time. Furthermore, this research was carried out without taking
into consideration the analysis of the regulations and the change in regulations, which
could influence and explain the ownership structure. Another limitation is the fact that only
blue chip companies were taken into consideration. Thus, this research found that there
exists a tendency to converge towards a widespread ownership structure for the largest
firms but there is no mention of the ownership situation in smaller firms. Moreover, this
research was focused only on the main stock indexes of 5 countries: the German DAX 30,
the French CAC 40, the Italian FTSE MIB, the Spanish IBEX 35 and the British FTSE 100.
Then, the data sample could be wider if other important European stock indexes were also
included.
Further research could detect if a convergence trend is also happening in the
corporate governance of smaller firms. Moreover, it could be interesting to analyse the
63
structure of the ownership in firms in other countries, in order to see if there is a global
convergence.
In terms of implications, this research contributes to understanding the current
ownership situation of blue chip firms in some countries. This is important for policymakers
because they have to adapt their regulations to solve the specific agency problems
resulting from widespread or concentrated ownership.
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