A Meta-Analytic Vision of the Effect of Ownership Structure on Firm Performance Juan P. Sánchez-Ballesta* and Emma García-Meca There is a considerable volume of research on the effects of ownership structure on firm performance. However, the empirical results in this field are often conflicting and inconsistent. A meta-analysis based on 33 studies allows an integration of the results on the association between insider ownership, ownership concentration and firm performance. The findings show that governance system, measurement of performance, and control for endogeneity moderate the effect of ownership on firm performance. Keywords: meta-analysis, ownership structure, firm performance, corporate governance Introduction O ne of the most widely discussed topics in both the academic literature and the business press concerns how to design corpo- rate mechanisms that lead to most effective decision-making. Corporate governance can be seen as the mean to reduce the agency costs produced by aligning managerial and share- holders’ interests, which should lead to a higher firm valuation. Jensen and Meckling (1976) showed formally how the allocation of shares among insiders and outsiders can influence the value of the firm. Since then, the relationship between ownership and firm performance has attracted special attention. Theoretical and empirical literature usually considers concentration of ownership and insider ownership as the main corporate mechanisms that affect firm value. However, among researchers, beliefs about the perfor- mance effects of ownership structure are not nearly so uniform. The empirical evidence regarding the rela- tionship between ownership concentration (blockholder ownership), measured by the fraction owned by the largest shareholders or by the significant shareholders, and firm value is mixed, and provides very little in the way of consistent results (e.g., McConnell and Servaes, 1990; Agrawal and Knoeber, 1996; Demsetz and Villalonga, 2001; de Miguel et al., 2004; Thomsen et al., 2006). Despite the wealth of research, the question remains whether large owners contribute to the solution of agency problems or whether they exacerbate them. The majority of empirical research states that if monitoring by owners improves the quality of managerial decisions, and if there are no other effects of ownership concentra- tion, performance and concentration will be positively correlated (Shleifer and Vishny, 1986). The argument is that owners wish to maximise profits, but their designated agents (managers) may have neither the interest nor the incentive to do so (Berle and Means, 1932). Consequently, ownership concentration is expected to affect performance directly, mainly due to the positive effects on the incen- tives to increase profits, which supports the hypothesis that large shareholders are active monitors in companies and that this monitor- ing helps increase the profitability of the firm (monitoring hypothesis). Nevertheless, according to agency theory, high concentration of ownership may become ineffective for taking value-maximising decisions. In this sense, some of the empirical evidence (Morck et al., 1988; McConnell and Servaes, 1990; Her- malin and Weisbach, 1991; Claessens et al., *Address for correspondence: University of Murcia, Account- ing and Finance, Campus Espinardo, Facultad Economía y Empresa, Murcia, 30100, Spain. Email: juanpsb@um.es. A META-ANALYTIC VISION OF THE EFFECT OF OWNERSHIP STRUCTURE ON FIRM PERFORMANCE 879 Volume 15 Number 5 September 2007 © 2007 The Authors Journal compilation © 2007 Blackwell Publishing Ltd, 9600 Garsington Road, Oxford, OX4 2DQ, UK and 350 Main St, Malden, MA, 02148, USA