Ownership and corporate governance across institutional contexts

• Published date: 01 November 2022
• Author: Xavier Castañer,Maria Goranova,Niels Hermes,Nikolaos Kavadis,Alessandro Zattoni
• Date: 01 November 2022
• DOI: http://doi.org/10.1111/corg.12491

EDITORIAL

Ownership and corporate governance across institutional

contexts

Abstract

Research Question/Issue: The purpose of this special

issue (SI) is to encourage research examining the effect of

different ownership types in and from different countries

on corporate governance and objectives.

Research Findings/Insights: The articles included in this SI

provide novel insights as to the influence of different

types of owners, including states and sovereign wealth

funds, families, and different types of institutional inves-

tors, as well as of other features of ownership structures,

on various aspects of corporate governance, in a variety of

institutional contexts.

Theoretical/Academic Implications: As companies face

different institutional contexts when they operate interna-

tionally, and shareholders have become increasingly global,

the resulting heterogeneity of shareholder types poses

new challenges in our understanding of their behavior.

This SI is a step in the direction of disentangling the com-

plex implications of ownership for corporate governance

across institutional contexts.

Practitioner/Policy Implications: Together with other

owner types, the ever-increasing $100 trillion global asset

management industry representing 40% of global market

capitalization (PwC, 2020) fuels corporate governance and

performance pressures on portfolio companies. The arti-

cles included in the SI provide useful insights as to the

new ownership landscape and its consequences for oper-

ating firms in different countries.

KEYWORDS

corporate governance, governance objective, institutional context,

ownership

1|INTRODUCTION

Ownership is at the core of corporate governance (Berle &

Means, 1932; Jensen & Meckling, 1976; Zattoni, 2011), as “no firm

exists without owners”(Aguilera & Crespí-Cladera, 2016, p. 50), and

the general assembly of shareholders is typically the supreme

governance body around the world, which appoints the members of

the board of directors.

Unsurprisingly, a burgeoning stream of research has emerged to

examine the implications of ownership for corporate governance

1

and

other dimensions of corporate behavior, such as strategy, invest-

ments, innovation, and performance (Boyd & Solarino, 2016).

While early research on the role of ownership focused mostly on

its concentration (e.g., Amihud & Lev, 1981; Demsetz, 1983;

Demsetz & Lehn, 1985; Shleifer & Vishny, 1997), an effort for more

fine-grained understanding of the heterogeneity in owner preferences

in relation to specific types of owners surfaced soon after

(e.g., Brickley et al., 1988; Bushee, 1998). Subsequent work has differ-

entiated owners based on their national origin (Aguilera & Crespí-

Cladera, 2016; Kavadis & Castañer, 2014; Kavadis & Castañer, 2015;

Pedersen & Thomsen, 1997) and continued to study different types

of ownership, such as founder, family, corporate, governmental, and

institutional (Aguilera et al., 2015; Thomsen & Pedersen, 2000;

Tihanyi et al., 2019; Wood & Wright, 2015), even focusing on differ-

ences within type, such as long-term versus short-term institutional

investors (Connelly et al., 2016; Oehmichen et al., 2021), and share-

holders investing in competing firms (Azar et al., 2018;He&

Huang, 2017).

The main motivation for this special issue (SI) was to encourage

research examining the effect of different ownership types in and

from different countries. Not only companies but also shareholders

face different institutional contexts when they operate internationally.

The “$100 Trillion Machine”(BCG, 2021) of global asset management

has already captured 40% of global market capitalization (PwC, 2020),

fueling corporate governance and performance pressures on portfolio

companies. By 2021, hedge funds have swelled to $4.3 trillion assets

under management (BarclayHedge, 2021), and private equity funds to

$9.8 trillion (McKinsey, 2022). Sovereign wealth funds (SWFs) have

also grown rapidly, exceeding $9 trillion by 2021 (SWFI, 2021). These

profound changes in corporate ownership have garnered significant

attention in corporate governance research and raised questions

about the behavior of different owner types, as well as the ways in

which different institutional environments influence their behavior.

We believe a new research impetus is necessary, especially as

corporate ownership is undergoing transformation: from the privatiza-

tion movement around the world (Bruton et al., 2015) to the growing

importance of ownership intermediation (Goranova & Ryan, 2022;

Kahle & Stulz, 2017). Individual investors, including entrepreneurs and

their families along with corporate investors and state owners, have

DOI: 10.1111/corg.12491

638 © 2022 John Wiley & Sons Ltd. Corp Govern Int Rev. 2022;30:638–655.wileyonlinelibrary.com/journal/corg

been joined by a cornucopia of institutional investors, such as public

and private pension funds; union, mutual, and hedge funds; and

exchange-traded funds. Furthermore, we have limited understanding

of the merits and challenges associated with universal owners

(Coffee, 2021), even though the Big Three (e.g., BlackRock, Vanguard,

and State Street) are the largest shareholder in 40% of US firms and in

88% of S&P500 firms (Fichtner et al., 2017).

The articles in this SI examine the role of different types of

owners—from family, state ownership. and SWFs to institutional

investors. Following prior research (e.g., Kavadis & Castañer, 2015),

several articles in this SI examine the tensions that emerge from the

simultaneous presence of different types of owners and how this

might affect different kinds of corporate decisions and outcomes,

such as investments (Croci et al., 2022; Ramírez et al., 2022), corpo-

rate social responsibility (CSR) activity (Fu et al., 2022; Kim &

Jo, 2022), the quality of corporate governance (Chen et al., 2022)

including financial misconduct (Shi et al., 2022) or overall performance

(Croci et al., 2022). The focus of several articles on both CSR activity

and the quality of corporate governance probably reflects the con-

temporary hopes that corporate owners could be paramount to the

solution of grand challenges, such as climate change, poverty, inequal-

ity, geopolitical conflicts, and human rights (Aguilera et al., 2021;

George et al., 2016; Scherer & Voegtlin, 2020). These hopes have

been fueled by the increasing importance of global investors as large

blockholders of companies around the world coupled with technologi-

cal advances facilitating their direct involvement, monitoring, and

influence over the portfolio firms they own.

Heightened societal awareness of environmental, social, and gov-

ernance (ESG) factors come together with greater social expectations

that shareholders can—or even should—institute principles of respon-

sible investing and nudge the corporations in their portfolios to

address the grand societal challenges of our times (Azar et al., 2021).

Thus, this SI contributes to extend the work of scholars

(e.g., Scherer & Voegtlin, 2020) who ask how ownership affects CSR,

environmental performance, and sustainability (see also Kavadis &

Thomsen, 2022).

Further, this SI also contributes to the growing research stream

on the influence of the institutional context on ownership and corpo-

rate governance, in parallel with the increasing internationalization of

investors. SI articles not only examine how the institutional contexts

vary across the 63 countries included in their samples but also raise

the question about the importance of the owners' institutional con-

text of origin.

The increased heterogeneity in corporate ownership in terms of

both owner type and country origin takes place in a global context,

itself in a state of profound transformation, amidst unprecedented

consequences of the COVID-19 pandemic, digital transformation,

decline of democracy, de-globalization, and rising global tensions

worldwide. Against this backdrop, established ways of thinking may

not be suitable anymore to understand the ways ownership and cor-

porate governance can contribute to a more prosperous future

(Kumar & Zattoni, 2017). This SI constitutes a forum of novel research

on corporate ownership, corporate governance, and corporate

behavior—and their consequences on firm results—facilitating cross-

fertilization of ideas across research streams and communities that try

to address the role of different and increasingly more salient owner

types (such as SWFs), and to better understand the influence of the

institutional context of both the focal corporation and the owners'

country of origin.

In the sections that follow, we present and reflect on the seven arti-

cles in this SI from different angles—that is, in terms of the ownership

types, the key questions, the theories, the methods, the geographical

focus, and the institutional contexts they cover (see Table 1).

We elaborate on how the articles complement each other, as well

as how they could be further leveraged to extend extant research. We

highlight how they collectively contribute to a more nuanced thinking

of ownership and corporate governance across institutional contexts.

In this vein, we conceptually organize our discussion around the three

key dimensions of ownership they cover: (i) the corporate governance

problem examined, (ii) the findings regarding different types of

ownership, and (iii) the influence on corporate governance of the

institutional context of the focal corporation, as well as of owners'

country of origin.

2|CONCEPTS AND THEORIES

2.1 |Concepts

The articles included in this SI hint to the substantial heterogeneity

inherent in the conceptualization of ownership in the literature. For

instance, Erakovi

c et al. (2022) use the term strategic investors in the

context of the privatization of previously state-owned firms to

describe individual or institutional investors that by law cannot sell

their shares for at least 5 years, thus imposing a minimal temporal

ownership commitment. The same terminology of strategic investors

is applied by Kim and Jo (2022) to state ownership through SWFs.

The notion of a family firm also differs widely across the articles in this

SI. Following Faccio and Lang (2002), Croci et al. (2022) define a fam-

ily firm as a corporation in which “a family (or an individual) holds 20%

or more of voting rights”(p. 5), with the family not necessarily being

the controlling owner or the one with the largest ownership. This con-

trasts with Shi et al. (2022) who have a less restrictive definition of

family firm, in which a family owns at least 5% of the firm's shares.

Another important definitional issue is the notion of control. Again, as

it is often the case in the literature, the articles in this SI use different

thresholds to define ownership control (i.e., the existence of a controlling

owner) versus a widely held corporation. For instance, while Croci et al.

(2022) use a 20% threshold (for Western European corporations), Kim

and Jo (2022) do not establish any threshold and rather refer to the larg-

est owner.

Clearly, differences in the definition of key corporate ownership

terms make it difficult to compare results and findings across studies.

Therefore, we believe that developing a standardized vocabulary that

entails a common agreement on the definitions of the key terms (con-

cepts) in corporate ownership research is necessary for the development

EDITORIAL 639