Are Owners Redundant?

Abstract

This paper explores how firms with different stakeholder structures choose their assets and liabilities and how they perform as economic entities. Our data from the Norwegian banking industry shows that ownerless firms are smaller, charge higher prices, and take on less risk than stockholder-owned firms, whereas partially stockholder-owned firms fall in between. Such behaviour is as expected when stakeholders use their control rights to make the firm behave in ways they prefer. More surprisingly, ownerless firms are not outperformed by firms fully or partially controlled by stockholders. This finding questions the critical role of owners posited by agency theory, but supports the idea that the disciplining effect of product market competition is a powerful substitute for ownership. The evidence also suggests that stockholders may benefit economically from internalizing welfare effects of their actions on other stakeholders, such as employees, customers, and the local community.

Organizational Structure and Performance in European Banks: A Reassessment

“…Other relevant studies include Bøhren and Josefsen (2007), who study the Norwegian banking industry and find that, compared to owner-controlled commercial banks, ownerless savings banks are less risky, smaller, and price their products less aggressively (and hence smooth competition). However, commercial banks do not outperform ownerless savings banks in economic terms.…”

“…Altunbas et al (2001) compare private, mutual, and public financial institutions. When using national databases, the division is usually made between mutual and stock institutions (Hasan and Lorenzo-Vivas (2002), Hermalin and Wallace (1994), and Bongini et al (2000)), or commercial banks and savings banks (Bøhren and Josefsen (2007), Garcia-Marco and Robles-Fernandez 2008, and Crespí et al (2004)). In this paper, we aim to provide a more comprehensive classification of ownership structures.…”

“…Our data also include some Portuguese savings banks (Table 1). Private savings banks, in turn, are present mostly in Spain and Norway (for Spanish savings banks, see Hasan and Lozano-Vivas (2002) and Garcia-Marco and Roblez-Fernandez (2008); for Norwegian savings banks, see Bøhren and Josefsen (2007)). They are also present in smaller numbers in Denmark, Iceland and Sweden, although in these countries the savings bank sector has also undergone demutualization.…”