OWNERSHIP ORGANIZATION AND FIRM PERFORMANCE

This essay reviews research on the type and degree of fragmentation of firm ownership with an emphasis on the consequences of ownership organization for firm performance. We use a property rights approach to synthesize sociological, organizational, legal, and economic research that has examined the effect of ownership organization on firm performance. Agency theorists generally assume that shareholders are homogenous and that their influence on firm performance is directly proportional to the percentage of equity they hold. However, empirical research following this approach has failed to produce definitive evidence. Class analysis perspectives interpret these inconclusive results as demonstrating that, regardless of ownership organization, firms are run to serve the capitalist class. An alternative interpretation is that shareholders are not homogeneous but that certain types of shareholders use their formal authority, social influence, and expertise to “capture” property rights and strongly influence firm performance. The influence of different types of owners may depend on industry characteristics, and we review literature pointing to a contingency theory of ownership organization.