Corporate Governance-An International Review
We assess how ownership concentration influences the sensitivities of expansion investments and maintenance investments to changes in a firm’s cash flow. We find the causal effect by exploiting the exogenous variation in the price of a firm’s product. We also evaluate whether state versus private ownership affects the impact of ownership concentration on investment–cash flow sensitivities.
Using detailed data from 134 major copper mines operating in 29 countries over a 17-year period, we show that a more concentrated ownership increases the sensitivity of expansion investments to changes in a firm’s cash flow, while we do not detect a significant effect for maintenance investments. We also find that state ownership negatively moderates the effects of ownership concentration on the expansion investment–cash flow sensitivity.
The findings improve our understanding of ownership structures and show the nuances of these structures when different ownership features are combined in the assessment of investment sensitivities.
The asymmetric effects of ownership structures on different investment sensitivities call for a more fine-grained analysis of incentives, benchmarking, and information disclosure policies. This issue is especially relevant in state-owned enterprises (SOEs) and in firms with a low ownership concentration.
Publicado en: Corporate Governance-An International Review