The impact of ownership and other corporate characteristics on performance of V4 companies

Abstract

The objective of this paper is to assess financial performance of Czech, Hungarian, Polish, and Slovak unlisted companies.The sample retrieved from the Amadeus database contains 171,095 firm-year observations for the period of 2010-2014.A linear regression model (weighted least squares with robust correction for standard errors) is run to regress Return on Assets (ROA) as the dependent variable against selected entity-specific factors, including ownership characteristics.Empirical evidence uncovers several findings.Firstly, the performance of V4 companies is comparable except for Hungary, where companies report lower ROA on average.Secondly, firms established after the failure of communist regimes outperform the privatised companies.Thirdly, the ownership characteristics do matter.Having domestic owners is not a disadvantage, as only the companies with controlling shareholders from the Anglo-Saxon countries perform better.Other jurisdictions of parents lead either to comparable (e.g., old EU members, developed Asian countries) or even worse (e.g., new EU members, post-Soviet bloc) performance as compared to domestic ownership.Similarly, family firms perform significantly better than the companies controlled by institutional owners or by public sector, but worse than the firms controlled by financial institutions.The listing status of a parent is not an influential factor of performance.Fourthly, the size of a company also matters, as small enterprises report better performance in their financial statements than medium and large undertakings.Fifthly, higher leverage undermines performance.Finally, there is a wide dispersion in average performance across the industries.The study results might be relevant for policy makers while choosing between direct and indirect support for diverse types of businesses.

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