Effects of Ownership Concentration on the Performance of Austrian Listed Companies

This paper applies panel data techniques to Austrian non-financial listed companies for investigating the managerial discretion hypothesis and asymmetric information. We ana- lyse full population of non-financial companies listed on the Vienna Stock Exchange from 2007- 2020. Equipment investment is susceptible to cash flows, providing evidence that over-investment leads to returns on investment lower than cost of capital. CFi,t-1/Ki,t-1 has a strongly positive effect in family-owned companies’ constraints. Cash constraints pre- vent firms from attaining optimal investment level. CFi,t-1/Ki,t-1 positively affects invest- ment providing strong evidence that state-owned companies’ managers exercise discre- tion while investing cash flows in sub-optimal projects. The effect of voting rights (VR) of ultimate shareholders on performance is an inverted U-curve with turning point at 49.8% VR concentration. Beyond this point downward slope provides strong evidence of en- trenchment hypothesis, with negative entrenchment effect dominating the incentive ef- fect. Ultimate shareholders’ expropriation is detrimental for minority shareholders. Large shareholders’ detrimental behaviour slows down growth of financial markets.