Shareholding concentration and pyramidal ownership structures in Belgium

According to Berle and Means (1932), dispersed ownership has given rise to separation of ownership and control. Demsetz and Lehn (1985) argue that ownership patterns reflect a trade-off of the risk to investors of concentrated investments in large firms and the control potential of the firm. Diversified shareholdings are useful from the point of view of risk reduction but discourage active participation of investors. As Franks and Mayer (1995c) point out, it is puzzling that the resolution of this trade off has taken such different forms in different countries. German and French equity markets can be characterized by few listed companies, an illiquid capital market where ownership and control is infrequently traded and complex systems of intercorporate holdings (Mayer 1993, Franks and Mayer 1992). Consequently, these structures are appropriately described as insider systems in which the corporate sector has controlling interests in itself; outsider investors, while able to participate in equity returns through the stock market, are not able to exert much control. In contrast, the Anglo-American system is a market oriented or outsider system and is characterized by a large number of listed companies, a liquid capital market where ownership and control rights are frequently traded and few intercorporate holdings.1 There are few large, controlling shareholdings and these are rarely associated with the corporate sector itself.