New research indicates that the concentration of domestic shareholder ownership in listed companies in the Eurozone, especially during economic crises, has a negative impact on the investment and resilience of these companies. In this context, focusing on foreign shareholder ownership can help improve economic resilience and reduce dependence on banks.
Domestic Ownership and Economic Resilience
According to recent reports, the average domestic ownership in listed companies in the Eurozone reaches 57 percent, while foreign investors hold only 34 percent of the shares of these companies. In other words, 9 percent of the shares of these companies also belong to investors from other countries in the Eurozone. This ownership structure has remained virtually unchanged since 2015.
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During the COVID-19 crisis, companies with concentrated domestic shareholders made less investment and lost more value. This indicates that the concentration of domestic ownership can lead to limitations in financing and consequently, a decrease in economic resilience.
The Necessity of Expanding Capital Markets in Europe
Research shows that creating a stronger capital market in Europe can help reduce companies' dependence on banks and increase private risk-taking. Given that foreign investment in companies can help improve their performance, creating a platform to facilitate foreign investment is deemed essential.
In this regard, international investments can help attract capital and reduce investment costs. For example, foreign investors, due to their geographical diversity, can be a source of financing and facilitate investment in European companies.
Overall, despite significant efforts to create a unified capital market in Europe, stock markets remain highly national. This situation highlights the need for fundamental changes in Europe's economic and financial policies. Therefore, creating a unified capital market and expanding foreign shareholder ownership can help improve economic resilience in this region.
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