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Ownership Structure, Corporate Value and Firm Investment: A Simultaneous Equations Analysis of Spanish Companies

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  • Félix López-Iturriaga
  • Juan Rodríguez-Sanz

Abstract

This paper is concerned with the set of mutualrelationships between firm valuation andinvestment, and with the possible endogeneityof ownership structure. In order to deal withthem properly, we aim to test the mutual impactof investment, corporate value and ownership bybroadening the usual framework with asimultaneous equations approach. Using a sampleof 140 Spanish listed companies for the1991–1997 period, we have found that,consistent with previous research, thealignment and entrenchment hypotheses seem tobe confirmed by the estimation of aone-equation model. However, when analyzed bymeans of a system of simultaneous equations inwhich a set of mutual relationships isintroduced, quite different results wereobtained. Although valuation and investment offirms are determined by managerial ownership,we have found that ownership structure may alsobe influenced both by investment and value.Consequently, it is not completely right toinfer that ownership structure determines firmvalue unidirectionally; however the benchmarkshould be broadened so as to take an explicitaccount of the mutual links between firm value,investment and ownership. Copyright Kluwer Academic Publishers 2001

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  • Félix López-Iturriaga & Juan Rodríguez-Sanz, 2001. "Ownership Structure, Corporate Value and Firm Investment: A Simultaneous Equations Analysis of Spanish Companies," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 5(2), pages 179-204, June.
    • Handle: RePEc:kap:jmgtgv:v:5:y:2001:i:2:p:179-204
    DOI: 10.1023/A:1013078225905
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    Cited by:

    1. Pyung K. Kang & Yoo Chan Kim, 2015. "The Impact of the Ownership Discrepancy Between Cash-Flow Rights and Voting Rights on Firms’ Soft Asset Investment Decisions: Evidence from Large Business Groups in South Korea," Group Decision and Negotiation, Springer, vol. 24(3), pages 429-450, May.
    2. Antonio Mínguez Vera & Kevin Campbell, 2007. "The Influence Of Gender On Spanish Boards Of Directors: An Empirical Analysis," Working Papers. Serie EC 2007-08, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    3. Antonio Mínguez & Juan Francisco Martín Ugedo, 2003. "El Consejo De Administración Como Mecanismo De Control: Evidencia Para El Mercado Español," Working Papers. Serie EC 2003-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

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