Influence of the Ownership Structure on the Performance of Innovative Companies in the USA
Elena Karnoukhova, undergraduate program Economics 2017 alumna, wrote her research thesis on what could be a significant reason for a company success. Her paper received grade 10 (excellent)
Elena on her thesis: My thesis was dedicated to the investigation of the ownership structure of innovative US companies. It means that in my work i was trying to understand who manages innovative companies in the US, and how it reflects on the company's performance. In this work I elaborated a new model of analysis of company`s structure because I divided owners on different types according to their strategies, not by the size of the stake. This new method has lead to specifically new and significant results, previously ignored in the academic literature.
I found out that not only the size of the stake of the owner matters, but its type reflects on the decision-making process inside the company. Also, the substantial distinction from previous work on this theme was the analysis of six different sectors of the economy in order to find the distinguishing feature of innovative companies. In this field I also achieved success, because my results showed that innovative companies have another ownership structure. In today's reality we see that innovative US companies became leaders in the world economy, surpassing oil and bank sectors.
So, other companies with low level of success or some technological start-ups could use the same ownership structure which will lead them to success. Moreover, I found that the specificity of innovative companies lays in the structure of the board of directors, who define the decision-making process. Thereby, the management of the company are able to build a sound ownership system. I’ve chosen this topic because during this year I was a participant of a group project in the Corporate Finance Center at the Faculty of Economic Sciences, where we investigated the financial architecture of 3000 US companies.
Thesis abstract:
In recent decades, innovative companies became one of the major driver of economy worldwide. According to surveys, nearly 70% of the world's most innovative companies in 2017 are U.S. firms. However, academic studies mostly focused on innovativeness of a firm, measuring through R&D spending, patent citation, and have neglected the role of capital structure, ownership structure, and the corporate governance. In this article we analyze the difference between technological and non-technological companies with an attempt to find out a reason of success of fast-growth corporations. This research uses Generalized Least Square model on a sample of 12565 firm-year observations during 2004-2015 period, to justify an assumption that various types of investor have different effects on firm performance of innovative companies. The research reveals the distinction between type of investor and investor`s strategy. By focusing on the ownership concentration we find an evidence that not all types of blockholders improve firm value. In general, our findings suggest that owners with potential business relationship with firms decrease firm value, and passive independent institutions enhance firm performance in virtue of active monitoring and long-term investment horizons. The results further suggest that board composition and CEO characteristics are essential for corporate firm performance of innovative companies. The findings are robust to alternative models and variable selection.
School of Finance, Elena's thesis advisor
Elena is one of the brightest young researchers I’ve ever seen during my academic career. Lena is a generator of new ideas; she explores the world of start-ups and corporations with the widely opened eyes. This is the most important feature for a dedicated researcher. She loves both new methods and new ideas, and combines them together to get new knowledge.