Private Ownership and Stock Performance

Abstract: We examine if stocks of firms, in which one private owner owns a large fraction of the company’s outstanding shares, generate positive abnormal returns for the shareholders. Our main results cannot show that this is true for all firms. However, secondary tests indicate that there is a relationship, at least for smaller firms. The outcome shows that these firms outperform the market significantly after controlling for well-known risk factors. The abnormal returns that we do find might be a reason why investors choose to invest a large fraction of his or her personal wealth in one firm and consequently pay the price of forgone differentiation.