"Too dispersed to monitor? Ownership dispersion, monitoring and the prediction of bank distress"

This paper conducts an empirical assessment of the theories stating that ownership concentration improves the quality of shareholders' monitoring. In contrast with other studies, we do not use regressions of risk/performance on ownership concentration. Instead, we build an early warning model of bank distress that includes a leading indicator derived from banks' share price, the Merton-KMV distance to default (DD). The significance of this indicator depends on the efficacy of shareholders' monitoring. On a sample of European banks, we show that the predictive power of the DD is satisfactory only when banks' shareholding is characterized by the presence of blockholders.Monitoring; Ownership concentration; Block ownership; Bank distress; Early warning models; Distance to default

French connection: interlocking directorates and the ownership-control nexus in an insider governance system

We reveal the non-separation of ownership and control for multiple blockholders in the French insider governance system. We show that overlapping directorships of large listed corporations are explained by their ownership connections. Both large and small stakes, from 20% to 1% of cash-flow rights or voting rights, have high explanatory power. Some shareholdings are control rather than monitoring related. We provide evidence also that cross-ownership allows CEOs to entrench themselves. Finally, we demonstrate that causality goes from ownership to interlocking directorates, for both unilateral stakes and cross-shareholdings

"Too dispersed to monitor? Ownership dispersion, monitoring and the prediction of bank distress"

37 pagesThis paper conducts an empirical assessment of the theories stating that ownership concentration improves the quality of shareholders' monitoring. In contrast with other studies, we do not use regressions of risk/performance on ownership concentration. Instead, we build an early warning model of bank distress that includes a leading indicator derived from banks' share price, the Merton-KMV distance to default (DD). The significance of this indicator depends on the efficacy of shareholders' monitoring. On a sample of European banks, we show that the predictive power of the DD is satisfactory only when banks' shareholding is characterized by the presence of blockholders

"Too dispersed to monitor? Ownership dispersion, monitoring and the prediction of bank distress"

This paper conducts an empirical assessment of the theories stating that ownership concentration improves the quality of shareholders' monitoring. In contrast with other studies, we do not use regressions of risk/performance on ownership concentration. Instead, we build an early warning model of bank distress that includes a leading indicator derived from banks' share price, the Merton-KMV distance to default (DD). The significance of this indicator depends on the efficacy of shareholders' monitoring. On a sample of European banks, we show that the predictive power of the DD is satisfactory only when banks' shareholding is characterized by the presence of blockholders

Ownership concentration and market discipline in European banking: Good monitoring but bad influence?

We investigate the impact of banks’ ownership concentration on the effectiveness of shareholders’ market discipline. More precisely, we first assess whether the ability of the distance to default to predict banks’ financial distress is affected by the level of ownership concentration (“monitoring” hypothesis). We also assess whether banks’ future financial situation is directly affected by ownership concentration (“influence” hypothesis). Our econometric estimates are conducted on a panel of 77 European banks observed between the first quarter of 1997 and the last quarter of 2005. We find that ownership dispersion reduces the predictive power of the distance to default. The data collected come from three sources: Bankscope, Datastream and Thomson One Banker Ownership. The econometric methodology is based on simple pooled-logit estimates corrected for the clustering effect. Several tests are then conducted to assess the robustness of the results. We also recall that theoretical results do exist to explain why banks’ ownership structure can alter market discipline and the ability of market-derived indicators to predict future financial distresses. This work finally suggests that the empirical literature dealing with market discipline should not focus only on the moral hazard potentially created by bad insurance deposit design, balance sheet opacity or the safety net: the evolution of banks ownership structure might also be an important prudential issue.market discipline; ownership concentration; banks’ risk taking

L'entreprise est à nous…

International audienceQuand on se demande si « l’entreprise est à nous », encore faut-il définir quel groupe se cache derrière le « nous »… Ce même slogan peut en effet être scandé par des travailleurs ou des actionnaires. Derrière cette lutte relative à la revendication d’un droit de propriété sur l’entreprise, on retrouverait le conflit entre le travail et le capital. Or, force est de constater que, ces dernières décennies, c’est le point de vue actionnarial qui domine celui des travailleurs (Favereau, 2014)

Financialisation of strategies, risk transfer, liquidity, property and control (In French)

The financialisation of strategies, as mentioned in the introduction, may be correlated with the dominant link between investment and funding. The principle of selection no longer seems to focus essentially on investment funding methods, but on investments themselves, according to a financial profitability criterion. The first part of the text deals with the question of “risk transfer”. The second part examines financialisation from the point of view of the principle of liquidity by emphasizing the importance of the assessment which markets exercise on the firms’ financial performance, but also on their industrial. The question of the link between property and control is dealt with in the third part of the text. It is explored in two phases: the link between structure and property rights on the one hand; the link between governance structure and resource allocation on the other hand. The general conclusion suggests placing the financial capital issue between science and magic. The conclusion is organized in two phases: the first phase means to emphasize three transverse dimensions of the financialisation process; the second phase proposes to put that process into a sequence going from the production of representations to the production of norms, to the question of the financialised firm’s model.Financialisation, risks, evaluation, liquidity, control, governance, external growth, representations, (business) models, (accounting) standards

Droit des actionnaires et concentration de la propriété en Europe

This paper presents legal indicators dealing with shareholder rights in general meeting. Assembled with the help of a comparative legal study (Shearman & Sterling LLP [2007]), the indicator is calculated for fifteen European countries. These measures reflect the ability of shareholders to appoint and dismiss directors of listed companies ("control rights") and the requirement of their vote on multiple decisions in general meeting ("structure rights"). A study on a sample of 287 European companies shows that these new indicators predict corporate control outcomes: the higher the control and structure rights are the more corporations are controlled by shareholders rather than by directors. This study highlights the institutional complementarities between the indicators we build, the Law and Finance indicators of legal protection of minority shareholders and ownership concentration.Cet article propose des indicateurs juridiques portant sur le pouvoir décisionnaire des actionnaires en assemblée générale dans quinze pays européens. Élaborés à l'aide d'une étude de droit comparé (Shearman & Sterling LLP [2007]), ces indicateurs reflètent la capacité des actionnaires à nommer et à révoquer les administrateurs des sociétés cotées d'une part (" droits de contrôle "), ainsi que leur implication dans un ensemble de décisions en assemblée générale d'autre part (" droits de structure "). Les indicateurs classiques de la Law and Finance et les mesures élaborées ici sont ensuite confrontés pour expliquer la concentration actionnariale de 287 sociétés cotées. Cette étude contre l'existence d'une complémentarité institutionnelle entre la concentration de la propriété des actions, la régulation des conflits d'agence et le pouvoir des actionnaires en assemblée générale

Liaisons financières et liaisons humaines selon François Morin

CC 401(K) 2012 Pour le chercheur s’intéressant aux réseaux inter-organisationnels, les travaux de François Morin constituent une source d’inspiration majeure. Comment se structurent les relations de pouvoirs entre firmes ? Quels sont les déterminants de l’autorité de la décision dans une société de capitaux, support juridique des grands groupes financiers et industriels ? François Morin propose une réponse théorique (1984, 1994) et pratique (1974, 1993, 1998, 2002, 2006, 2011) à ces questions..

Control or monitoring ? : the shareholders functions in European and French listes companies from 1997 to 2006

L'objet de cette thèse est d'évaluer la portée opérationnelle des fonctions de surveillance et de contrôle que les théories économiques attribuent aux actionnaires. La thèse défend l'idée que le rôle des détenteurs de parts sociales se comprend davantage par la fonction de contrôle, qui associe le pouvoir décisionnaire à la possession du capital-actions, que par la fonction de surveillance qui, pour sa part, fonde l'autorité de la décision sur la détention d'une information. Pour ce faire, le premier chapitre rappelle d'abord que la surveillance a pour fonction de réduire les asymétries informationnelles inhérentes à la délégation de la décision ; le contrôle a quant à lui pour fonction d'assurer la maîtrise du pouvoir décisionnaire. Nous montrons dans le deuxième chapitre, en construisant des indicateurs s'inscrivant dans le champ empirique de la Law & Finance, que ces deux conceptions sont complémentaires dans l'explication de la diversité des structures de propriété européennes. Les troisième et quatrième chapitres portent respectivement sur un test empirique de chacune de ces notions. La surveillance actionnariale permet l'acquisition d'une information prospective. Toutefois, cette facette de la discipline de marché ne saurait à elle seule expliquer les ressorts du pouvoir actionnarial dans la firme. Ce pouvoir se révèle alors dans la fonction de contrôle dès lors qu'il est possible de montrer que de très faibles participations financières se traduisent, pour leurs détenteurs, par une représentation au sein des conseils d'administration.The objective of this thesis is to operationalize the theoretical monitoring and control shareholders' functions. The main idea is that the power of blockholders is better understood by the control claim rather than by the monitoring claim. According to the control concept, the decision-making comes from the share holding while the monitoring view states that the authority decision is based on information gathering. As such, the first chapter recall that the main purpose of monitoring is to reduce informational asymetries of the agency relationship while the goal of control is to make the decision. Then, the thesis provides three empirical achievements. In the scond chapter, we build legal indicators delaing with shareholders control and combine them with Law & Finance indicators that focus on the resolution of agency conflicts. We discuss their institutional complementarities in explaining european ownership structures. The third chapter is a test of the monitoring by large shareholders. It shows that blockholders can acquire prospective information but this resolution of market failure does not give them a role in decision-making. Then, the main result of the fourth chpater is that shareholders seek to have control since they can obtain seat on boards by means of very low shareholdings