Whether patterns of ownership and control affect firm performance is unresolved in the conceptual literature, which balances agency costs against efficient management. We investigate the question for a sample of 90 firms in Australia in the 1930s, a critical period for the growth of its capital markets and in a distinctive setting. We confirm the conclusions reached by a limited range of historical studies that little or no relationship existed between performance and the degree of control exercised by company directors. Delving more closely into the key managerial roles, those Chairmen with connections across industries fared better. Where managerial power was concentrated in a dual Chair and Managing Director, it negatively impacted performance. However, large ‘active’ investors are associated with greater returns and higher company value, suggesting a countervailing power on the Board. Future research might focus on these key leadership positions and how they shaped the fate of companies.
Fleming et al. (Mon,) studied this question.