Across the social sciences, agency theory has become one of the basic
frameworks through which to analyze the organizational problem of
aligning interests between owners (principals) and those who carry out
the work of the corporation (agents). Less often analyzed within this
framework is the problem of multiple principals with different
incentives and agendas. In today's global economy, this is a problem
that institutional investors from around the world encounter on a
regular basis. We argue that ownership concentration holds the key to
dealing with the collective action problems that emerge in these
circumstances. To provide empirical insight into these issues, we
analyze the impact of ownership concentration in multiple-principal
firms that have been listed on the Shanghai and Shenzhen stock exchanges
over the last decade. Through these data, we show that the strongest
factor shaping performance among this population of firms is ownership
concentration: the higher a firm's ownership concentration, the better
it performs, both in terms of profitability and in terms of efficiency.
Further, as markets in this context have become more competitive over
the last decade, overall profitability has declined, but the effect of
ownership concentration has increased, suggesting that ownership
concentration becomes even more important for achieving corporate goals
as markets become more competitive