Blockholders in the Helsinki Stock Exchange : connections between large shareholders’ identities and Finnish listed firms

Abstract

This thesis investigates whether connections suggested by corporate governance theory are observable between different types of large, influential owners i.e. blockholders and the financial performance and characteristics of Finnish listed firms in the sample period of 2009-2019.

Prior literature finds blockholders to present a viable option for reducing agency costs that originate from the differing goals of shareholders and professional management. On the other hand, blockholders may cause other types of agency costs by consuming corporate resources at the expense of minority shareholders. Different ownership identities are also found to differ in preferences regarding firm characteristics and financial outcomes.

This descriptive, comparative study of corporate governance utilizes the statistical method of the difference-in-means t-test to test for potential performance differentials of control. Financial performance is measured as both profitability and growth. Using the threshold of 10 % ownership of total votes, the firms in the sample are sorted into seven ownership categories according to the identity of their largest shareholder. When no shareholder owning 10 % or more of total votes is present, a firm is sorted into the diffuse (i.e. widely held) category. This category is used as a reference point when calculating the performance differentials of control. All firms with shareholders owning 10 % or more of total votes are sorted to six blockholder categories: (i) state, (ii) institutional, (iii) private individual, (iv) family, (v) corporate, or (vi) coop. To control for unobserved industry- and market-level effects, reference indices comprised of category-specific weighed averages are also constructed. Main variables of interest are ROA, revenue growth, firm size, dividend payout ratio, profit volatility, and leverage. For robustness, the tests are repeated with data where the most extreme 5 % of observations are capped at the 2,5th and the 97,5th percentile.

Specific blockholder identities are found to cluster around specific industries. The best ownership categories when measured through financial performance are found to be the diffuse category and the corporate blockholder category. The state category performs well with ROA but suffers from slow growth. The institutional category displays negative differentials for both, but the results are not statistically significant after robustness checks. The individual category displays low profitability but high growth. The family and cooperative categories suffer from negative differentials in both ROA and growth. For some categories the differentials are suspected to be industry-related in nature.

Two recommendations are made in relation to the findings: (i) improving liquidity in the Helsinki Stock Exchange and (ii) advancing the internationalization of Finnish listed firms.