2,160 research outputs found
The Principle of Proportionality: Separating the Impact of Dual Class Shares, Pyramids and Cross-ownership on Firm Value Across Legal Regimes in Western Europe
Recent policy initiatives within the harmonization of European company laws have promoted a so-called âprinciple of proportionalityâ through proposals that regulate mechanisms opposing a proportional distribution of ownership and control. We scrutinize the foundation for these initiatives by analyzing the use of instruments to separate ownership from control across legal regimes in a sample of over 4,000 publicly traded firms from 14 Western European countries. First, we confirm the negative impact on firm value from disproportional ownership structures previously established in a sample of Asian firms by Claessens et al. (2002). Second, we show that dual class shares have a larger and more significant negative effect on firm value than pyramids and cross holdings. Third, we find that the impact of disproportionality and the underlying instruments is inversely related to the level of investor protection. Thus, dual class shares and pyramids substitute legal protection in countries with inadequate investor protection. Fourth, we find no evidence of a significant effect of disproportionality instruments on earnings performance. Finally, we discuss policy implications of these findings in relationship to the process of harmonization of the European capital markets.ownership structure; dual class shares; pyramids; EU company laws
Private Contracting and Corporate Governance: Evidence from the Provision of Tag-Along Rights in an Emerging Market
We analyse controlling owners incentive to provide non-controlling owners with better protection against self-dealing through offering new shares with tag-along rights, - the private contracting alternative to equal price provision in takeover legislation. Our model identifies two counteracting effects: The benefit of offering tag-along rights is the anti-expropriation effect which makes it harder for new owners to finance a takeover through expropriation of minority owners. The cost is the rent transfer effect which implies that there is a wealth transfer from controlling owners to existing minority owners. Empirically we test the implications of the model using data on equity offerings in Brazil. Consistent with the theoretical predictions we find that offering tag-along rights increases market value of a firm and that companies offering shares with tag-along rights offer larger claims, have less disproportional ownership structure, have a smaller group of existing minority shareholders and are more likely to issue new shares. The paper, thus, find strong support for private contracting being an important alternative governance mechanism to legal protection of investors.Private contracting, Corporate governance, Emerging markets, Tag-along rights
How are U.S. Family Firms Controlled?
In large U.S. corporations, founding families are the only blockholders whose control rights on average exceed their cash-flow rights. We analyze how they achieve this wedge, and at what cost. Indirect ownership through trusts, foundations, limited partnerships, and other corporations is prevalent but rarely creates a wedge (a pyramid). The primary sources of the wedge are dual-class stock, disproportionate board representation, and voting agreements. Each control-enhancing mechanism has a different impact on value. Our findings suggest that the potential agency conflict between large shareholders and public shareholders in the United States is as relevant as elsewhere in the world
How do sovereign wealth funds pay their portfolio companiesâ executives? Evidence from Kuwait
Sovereign wealth funds (SWFs) are major players in the global markets. This paper examines the possible value SWFs bring to their domestic holdings by examining the impact of SWF ownership on firmsâ executive compensation. Using data on Kuwaiti SWFs, we find that having an SWF as an ultimate owner enhances the payâperformance sensitivity (PPS) to levels matching those in more developed markets. This payâperformance enhancement increases as the rights of the SWF to manage and oversee the firmâs cash-flow increase. Moreover, having an SWF as the firmâs ultimate owner alleviates the adverse effects of the divergence in cash-flow and control rights. This evidence supports the notion that SWFs create value for their target investments through activism, monitoring and corporate governance enhancements
Degrees of permeability: confinement, power and resistance in Freetown's Central Prison
This article deconstructs a binary that has arisen between prisons as, on the one hand, âtotal institutionsâ of exclusion and, on the other, âcarceral continuumsâ that incorporate marginalized urban livelihoods. The experiences of four inmates at Pademba Road, Freetownâs male prison â which accommodates inmates with sentences from one year to life â illustrate that prisons belong in neither camp. Instead, inmatesâ unique responses to their imprisonment show that both a prisonâs continuity and its exclusionary mechanism are situational and gendered as crime, social standing, capital and agency coalesce. Following Michel de Certeauâs examination of peopleâs reappropriations of culture in everyday life, this article analyses how inmatesâ tactics to reinforce and bend prison walls work to either strengthen or undermine the carceral systemâs strategies and influence the prisonâs permeability. Inmatesâ embodied experiences allow for a nuanced understanding of the inside/outside relationship of imprisonment and of the space between mobility and stasis, subjugation, embrace and resistance.</jats:p
Institutional Ownership and the Returns on Investment
By examining a large number of Swedish listed firms, we analyse how institutional and foreign owners affect investment performance. To measure investment performance Mueller and Reardonâs (1993) marginal q is used, although derived directly from Tobinâs average q. Marginal q measures the ratio of the return on investment to the cost of capital. Our findings show that both domestic and foreign institutional owners positively influence firm performance. Furthermore a non-linear relation between institutional ownership concentration and performance is found. This is consistent with positive incentive effects and negative entrenchment effects. During the last decades the ownership structure of Swedish firms has undergone dramatic changes: institutional and foreign investors have been increasing their stakes, whereas Swedish households have decreased in importance. Controlling owners, often founding families, remain in control by resorting to an extensive use of dual-class shares. The practice of dual-class shares which separates cash-flow rights and control rights is also found to be an important determinant of firm performance that eradicates the positive influence of institutional ownership.Corporate governance; institutions; ownership; performance; Tobinâs q; marginal q;
Separating the Impact of Dual Class Shares, Pyramids and Cross-ownership on Firm Value Across Legal Regimes in Western Europe
Recent policy initiatives within the harmonization of European company laws have promoted a so-called "principle of proportionality" through proposals that regulate mechanisms opposing a proportional distribution of ownership and control. We scrutinize the foundation for these initiatives by analyzing the use of instruments to separate ownership from control across legal regimes in a sample of over 4,000 publicly traded firms from 14 Western European countries. First, we confirm the negative impact on firm value from disproportional ownership structures previously established in a sample of Asian firms by Claessens et al. (2002). Second, we show that dual class shares have a larger and more significant negative effect on firm value than pyramids and cross holdings. Third, we find that the impact of disproportionality and the underlying instruments is inversely related to the level of investor protection. Thus, dual class shares and pyramids substitute legal protection in countries with inadequate investor protection. Fourth, we find no evidence of a significant effect of disproportionality instruments on earnings performance. Finally, we discuss policy implications of these findings in relationship to the process of harmonization of the European capital markets.
JEL classifications: G30, G32, G34 and G38
Keywords: Ownership Structure, Dual Class Shares, Pyramids, EU company
laws
Impact of ownership structure and ownership concentration on credit risk of Chinese commercial banks
The file attached to this record is the author's final peer reviewed version. The Publisher's final version can be found by following the DOI link.Purpose- The purpose of this study is to examine the effects of bank ownership structure and ownership concentration on credit risk.
Design/methodology/approach- Using panel data on a sample of 88 Chinese commercial banks with 1194 observations over a period of 2003-2018, this study employs system generalised method of moments regression to examine the impact of bank ownership structure and ownership concentration on credit risk. Two measures of credit risk, namely, non-performing loan ratio and loan loss provision ratio are used to ensure the robustness of the results.
Findingsâ The results show that ownership type (both government and private ownership) exert positive and significant impact on credit risk. However, our results indicate that concentration of ownership in the hands of government has negative and significant effect on credit risk while private ownership concentration positively impacts on credit risk. Overall our findings suggest that concentration of ownership in government hands reduces risk, whilst private ownership concentration exacerbates credit risks. Our results are invariant to alternative measures of credit risk and financial crisis.
Practical implications â The findings provide useful insight to guide policy decisions in Chinese banksâ lending policies and bank ownership.
Originality/valueâ Using hand collected data on ownership structure and governance from annual reports this study deepens our understanding on the effectiveness of Chinese banksâ corporate governance reforms on managing credit risks
Do target shareholder agreements induce bidders to pay higher premiums?.
In listed companies, some shareholders can be signatories to agreements that govern their relations. Such agreements are often viewed as means of insulating the firm from the market for corporate control. Specific provisions (namely concerted action, pre-emptive buying rights and repartitioning of board seats) are indeed likely to influence the outcome of takeovers. Using a sample of French deals, this paper investigates the impact of shareholder agreements on takeover premiums. A shareholder agreement is in force in 27.1% of target companies. A positive relationship between shareholder pacts and takeover premiums is observed. This result is robust to the use of an econometrical specification which treats as endogenous the existence of a shareholder agreement. This finding suggests that shareholder pacts dramatically increase the negotiating power of target shareholders.Corporate Governance; Takeover Premiums; Shareholder Agreements;
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