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Many European companies use some type of control-enhancing mechanism, such as dual class shares or a pyramid ownership structure. Such mechanisms cause deviations from the one share--one vote principle, allocating more voting rights than cash flow rights to some shares and, in turn, providing...
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The literature on deviations from one share-one vote seems to ignore that a difference between influence and investment, i.e., disproportionality, may exist without control enhancing mechanisms such as dual class shares. I propose a method to disentangle disproportionality and argue for its...
Persistent link: https://www.econbiz.de/10010594147
Shares with more voting rights than cash flow rights provide their owners with a disproportional influence that is often found to destroy the value of outside equity. This is taken as evidence of discretionary use of power. However, concentration of power does not necessarily result from control...
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This paper reports a study of how the benefits that large shareholders derive from their control of a firm affect the equity issue and investment decisions of the firm. I introduce an explicit agency cost structure based on the benefits of control of the largest shareholder. In a simple...
Persistent link: https://www.econbiz.de/10010989451
This paper presents an analytical framework from which it can be inferred whether sellers or buyers in corporate control transactions value private benefits highest. I am thus able to suggest an answer to the question: Are blocks of shares traded because the buyer is a more efficient monitor...
Persistent link: https://www.econbiz.de/10005802555
This paper studies how large shareholders with bene…ts of control a¤ect …rms’ equity issue behavior and investment decisions. I introduce an explicit agency cost structure based on the large shareholder’s bene…ts of control. In a simple extension of Myers and Majluf [1984], I show...
Persistent link: https://www.econbiz.de/10005802557
Can corporate governance ratings reduce problems of asymmetric information between companies and investors? To answer this question, we set out to examine the information basis for providing such ratings by reviewing corporate governance attributes that are required or recommended in laws,...
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