In Focus Commercial Credit
Owners of major listed firms
A review of the ownership of the world’s major listed companies shows the public sector playing a surprising role
Mats Isaksson Head of corporate governance and corporate finance, the OECD
At the end of 2017, there were approximately 41,000 listed companies in the world. Their combined market value was about $84tr, which is equivalent to world GDP. So who owns these companies and how
they perform their role as shareholders is of economy-wide importance. It will affect not only the amount of risk capital that is made available to independent entrepreneurs who can challenge the status quo by developing new technologies and products. It will also affect how the performance of existing firms is scrutinised and how decisions about their future direction are made.
Firm-level By using firm-level ownership information from 10,000 large listed companies, that together make up 90% of the global market capitalisation, our report provides unique data about who their owners are and how they own. The findings provide an empirical starting
point for understanding how important features in corporate ownership may impact key policy priorities such as productivity growth and business sector dynamics.
Major concerns At least three major concerns stand out: l First is the influence on shareholder scrutiny and small growth company listings that come with increased institutional ownership. Today, institutional investors hold 41% of global market capitalisation and in advanced economies they have also become significant owners in individual companies. When large institutional investors mainly practice passive indexed based investing, it may be quite rational that they pay little attention to the risks and opportunities in individual companies. As a consequence, insufficient resources may be spent on one of the capital markets’ key functions, namely
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to scrutinise individual corporate performance and provide new independent companies with capital that help them grow. l Second is the direct and indirect political influence on publicly-traded companies that may follow from the significant amount of public-sector ownership. Today 14% of global stock-market capitalisation is held by the public sector. Either through direct government ownership or through sovereign wealth funds, public pension funds, and other related vehicles. In almost 10% of the world’s largest listed companies does the public sector hold more than 50% of the shares. With public-sector ownership at this level, it will be important to consider how political priorities directly and indirectly influence corporate decisions as well as their economic effects on ultimate beneficiaries such as tax-payers and pensioners. l Last but not least, is the widespread concentration of ownership in individual companies. In half of the world’s listed firms, the largest three shareholders hold more than 50% of the capital. This may obviously have the positive corporate governance effect of overcoming the so-called agency problem that is said to face shareholders in companies with dispersed ownership. But it may also increase the scope for abusing the rights of other shareholders and, if not properly regulated, jeopardise market confidence. The picture of worldwide corporate
ownership presented in this report and the
fact that diverse corporate governance regimes continue to co-exist, suggest that the discussion about national corporate governance policies increasingly should consider the ultimate long-term effects on productivity and business dynamics, as well as its impact on alternative funding sources such as private capital markets. After all, the effectiveness with which a
country’s capital market serves its key functions of providing the real economy with risk capital and the vigilance with which its scrutinises its use in individual companies are critical for a county’s long- term competitiveness.
Institutional investors hold 41% of global market capitalisation and in advanced economies they have also become significant owners in individual companies
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Key findings l Four main sections of investors dominate the ownership of today’s publicly-listed firms. These are institutional investors, public- sector owners, private corporations, and strategic individual investors. l The largest category is institutional investors holding 41% of the global market capitalisation. These are mainly profit- maximising intermediaries that invest on behalf of their ultimate beneficiaries. The most important ones are mutual funds, pension funds, and insurance firms. US- domiciled institutional investors account for 65% of global institutional investor holdings. l Institutional investors dominate the ownership of listed companies in the United States, the United Kingdom and Canada, both at an aggregate level and at the company level. In these markets, the average combined holdings held by a company’s 10 largest institutional investors add up to more than 29% of the company’s equity capital. In the United States, the average combined ownership held by listed company’s 10 largest institutional investors is 43%. l The second largest category of owner is the public sector, which holds 14% of the
November 2019
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