The Determinants of Corporate Ownership Structure: Australian Evidence

There is growing interest in trying to explain differing corporate ownership structures in different countries. La Porta, Lopez-de-Silanes, Shleifer and Vishny (1998) find that the quality of legal protection of shareholders helps determine ownership concentration: in countries with relatively poor legal protection of investors, publicly listed companies are likely to have large blockholders. In contrast, Roe (2000) seeks to explain ownership differences in terms of politics and finds that publicly listed companies in social democracies are more likely to have concentrated ownership than their counterparts in the (non-socially democratic) United States. Bebchuk (1999a, 1999b) develops a model which predicts that the proportion of a country's publicly listed firms having a controlling shareholder depends on the size of private benefits of control in the corporate sector. Bebchuk extends his model to explain differences in ownership structure among companies in the same country. The model indicates that a company is more likely to have a large blockholder when the private benefits of control potentially available to a blockholder at that company are comparatively large. This paper examines the factors associated with ownership structure among publicly listed Australian companies. The results indicate that private benefits of control help explain the differences in ownership structure among Australian companies.