Ownership Identity's Effect on Firm Performance

Abstract

This thesis is a research on differences in performance between state owned and privately owned companies in Norway, including all registered companies in the time period between 2000 and 2017. Norway is a country where the state plays an important role in regular markets due to their significant share of ownership in the country. Hence, the management of state ownership in Norway is important for the trust in the Norwegian capital market. Previous research suggest that state ownership have a negative impact on firm performance as governments are also expected to use their influence to reach sociopolitical goals that are not profit maximizing. This thesis hypothesize that state owned firms have lower performance than private firms, as private investors commonly focus more on efficiency, profit maximizing and personal gain. Through a cross-sectional analysis, the hypotheses are investigated simultaneously. Firm performance is defined as return on assets, and the impact by state owned and privately owned firms are tested by defining variables for ownership identity in five different intervals, as well as corporate governance and firm effects. The results show that state owned firms have lower performance than privately owned firms, which was further confirmed when testing for the effects on performance of firms having the state as a large blockholder compared to nonstate blockholders. Higher number of blockholders affect firm performance positively, while a higher number of board members have a negative impact on performance in a firm. In addition, we find that the control variables of our analysis have a high degree of explanatory power, giving them a relative importance when studying firm performance in terms of ownership identity. Moreover, state owned companies are found to be associated with a more negative firm performance, both when holding a small stake of a company as well as when being a large blockholder.