ownership concentration

The aim of the study is to examine the effect of ownership concentration by sum of major shareholders on the firm value. The sample used for the research included 69 firms listed during the years 2005-2009 in Tehran Stock exchange. The statistical method used for testing the research hypotheses was "Panel Data". To test the relationship between ownership of major stockholders and firm value, multi-linear and nonlinear regression was utilized. The findings are indicative of the existence of a significant and positive linear relationship between ownership concentration of sum of major stockholders and firm value and also of lack of nonlinear relationship between the square sum of ownership by major stockholders and firm value. The results of piecewise test of sum of major stockholders shows that there is no significant relationship between sum of major stockholders and firm value in the break points of 10% and 25% and 50% and 70%.

With the growth of capital market, the shareholding structure of companies has become more complex. Direct ownership is easily recognizable through companies’ shareholders information, however with the formation of cross shareholding among companies, a kind of indirect and complex shareholding has emerged which is not observable. The primary owners (original owners) can take over other companies through intermediate owners. In this research a model is presented to identify and investigate the structure of indirect ownership. Identifying the hidden ownership relations together with determining the level of complexity of network and the degree of ownership concentration are among the capabilities of this model. To this end, the ownership network of Tehran Stock Exchange in June 2014 was analyzed. The results indicate that over 86 percent of all observed ownership relations have been formed by indirect ownership and at least with the presence of one intermediate owner. Moreover, 15.35 percent of the market’s total value (equals with 547 thousands billion Rials) was calculated twice and also studying the degree of concentration of ownership indicates that over 60 percent of the market’s total value belongs to only 10 percent of the shareholders. JEL Classifications: L16, G32