Does the Proxy for Shareholders' Control Make a Difference in Firm-Performance Regressions? Evidence from a Blockholder System of Corporate Governance

One of the critical determinants of firm performance in corporate governance investigations is the degree of control exercised by large shareholders. This paper empirically assesses the use of ultimate-ownership shares and solutions of voting games (i.e. power indices) as alternative proxies for this control. Estimates from a panel of Spanish listed firms show that both proxies provide similar results. Also, paying no heed to the potential endogeneity of the degree of control may result in misleading inferences. These conclusions are likely to hold for other blockholder systems of corporate governance