Ownership Concentration in Sweden: Minority Expropriation or Alignment of Interest?

Abstract: This paper analyzes two important aspects of concentrated ownership structures; control enhancing mechanisms and the determinants of family control. In this way, we contrast two perspectives on concentrated ownership structures; first, that firm value is destroyed due to the expropriation of private benefits of control and second, that the presence of a controlling shareholder can positively affect firm value by aligning the interest of shareholders and management. Our findings on the release of family control and control enhancing mechanisms indicate that there is no evidence of minority expropriation in Sweden. Instead, concentrated ownership seems to destroy value due to lower leverage, less aggressive growth strategies and overinvestment. We also find that family control of firms is determined by the family’s desire to gain social status and reputation. Moreover, families employ control enhancing mechanisms in order to maintain control; however, the use seems to be limited by social norms and concerns about reputation.