This paper examines the effect of the structure of ownership on the market assessment of sale of assets. Three types of ownership structures are identified in this regard such as, large block outside, inside and widely held ownerships. The empirical results indicate that firms with ‘large block outside shareholders’, experience significantly positive ‘announcement effects’ for both selling and buying firm samples. These are significantly greater than those for the inside shareholder and large widely held firms. This paper also examines whether the ownership structure of the firm involved in transaction with and disclosure of the price of the transaction has an effect on the market assessment of the deal.

The purpose of this paper is to determine whether ownership structure affects firm performance. This requires that firms be classified into various ownership types and that circumstances are found where differences among types of firms are reflected in their behavior. Three ownership structures are identified from previous literatures, viz., firms with large outside shareholders, firms with large inside shareholders and widely held firms.

Firms are then compared with regard to effects of the acquisition or sale of an asset on their stock price. If there is no observed difference in the stock price effect (announcement effect) between the ownership types, then the conclusion would be that ownership structure is not seen to be a factor affecting firm performance (at least in this case). But if (as will turn out to be the case) firms with large block outside shareholders experience a greater announcement effect than either widely held or large inside shareholder firms, then ownership structure does influence firm performance.

Performance is measured by the market’s reaction to the announcement of the asset sale for both buying and selling firms. The market’s reaction is recorded in an ‘event study’, a study of the changes in the stock price (and therefore the market value) around the announcement of the transaction. Observed changes are then compared to what would be expected if there were no event or transaction. If a transaction is seen to be in the best interests of shareholders, there will be a positive change in the stock price. If the change in stock prices are greater for firms with large outside shareholders than other ownership structures, that would be evidence that such firms are viewed by the market as making better deals than other firms. This may result from the incentive of the large outside shareholder to monitor management.

Corporate Governance Journal, Market Assessments, Ownership Structures, Net Present Value Projects, Management-Controlled Firms, Management Entrenchment, Mergers and Acquisitions, Ownership Database, Market Model Regression, Shareholder Firms, Securities and Exchange Commission, SEC.