Ownership structure and portfolio performance: Pre- and post-crisis evidence from the Casablanca Stock Exchange

This paper uses the data from Casablanca Stock Exchange to document whether the value relevance of ownership structure changed as the market conditions changed. We show that the performance (average returns, Sharpe ratios, Sortino ratios, information ratios and CAPM alpha) of portfolios comprising of firms with concentrated ownership structure deteriorate significantly during the post-crisis period – the period characterized by lack luster market conditions. We show relatively poor performance of these portfolios relative to portfolios comprising of firms with dispersed ownership structure during the post-crisis period. We argue that lack luster performance of the Casablanca Stock Exchange during the post-crisis period, increased the incentives for controlling shareholders to expropriate. Investors recognized these incentives and discounted firms that were more likely to expropriate.