Family Control and the Rent-Seeking Society

The small number of very large family-controlled corporate groups in many countries combined with their long continuity of control and ability to act discretely give these organizations a comparative advantage in political rent-seeking. This advantage is a key part of a self-reinforcing system whereby oligarchic family corporate control, political rent seeking, and low general levels of trust combine to stymie growth.http://deepblue.lib.umich.edu/bitstream/2027.42/39971/3/wp585.pd

The Global History of Corporate Governance: An Introduction

This paper presents a synopsis of recent NBER studies of the history of corporate governance in Canada, China, France, Germany, Japan, India, Italy, the Netherlands, Sweden, the United Kingdom, and the United States. Together, the studies underscore the importance of path dependence, often as far back into preindustrial period; legal system origin, though in a more nuanced form than mere statutory shareholder rights; and wealthy families. They also clarify the roles of ideologies, business groups, trust, institutional transplants, and politics in institutional evolution and financial development. Other themes are the universality of business insiders' investments in, entrenchment, and a possible behavioral basis for this.

Firm-Specific Variation and Openness in Emerging Markets

This paper compares the comovement of individual stock returns across emerging markets. Campbell et al. (2001) and Morck et al. (2000) show that the US in the post war period saw rising firm specific stock return variations and thus declining comovement. We detect a similar, albeit weaker, pattern in most, but not all, emerging markets. We further find that higher firm-specific variation is associated with greater capital market openness, but not goods market openness. Moreover, this relationship is magnified by institutional integrity (good government). Goods market openness is associated with higher market-wide variation.http://deepblue.lib.umich.edu/bitstream/2027.42/40009/3/wp623.pd

Heterogeneous Investors and their Changing Demand and Supply Schedules for Individual Common Stocks

Using 550 million limit orders submitted in the Korea Stock Exchange, we estimate demand and supply elasticities of heterogeneous investor types and their changes around the Asian financial crisis. We find that domestic individuals have substantially more inelastic demand and supply curves than domestic institutions and foreign investors. The crisis permanently reduced price elasticities of domestic individuals by 50% but had no effect on those of foreign investors. Institutional changes restricting margin purchases, implemented after the crisis, seem particularly important in explaining the dramatic drop. Information heterogeneity, availability of close substitutes and arbitrage risk also explain time-series variations in elasticities.

Capital Markets and Capital Allocation: Implications for Economies in Transition

http://deepblue.lib.umich.edu/bitstream/2027.42/39801/3/wp417.pd

The Information Content of Stock Markets: Why do Emerging Markets have Synchronous Stock Price Movements?

http://deepblue.lib.umich.edu/bitstream/2027.42/39434/3/wp44.pd

Inherited Wealth, Corporate Control and Economic Growth

Countries in which billionaire heirs' wealth is large relative to G.D.P. grow more slowly; show signs of more political rent seeking, and spend less on innovation than do other countries at similar levels of development. In contrast, countries in which self-made entrepreneur billionaire wealth is large relative to G.D.P. grow more rapidly and show fewer signs of rent seeking. We argue that this is consistent with wealthy entrenched families having objectives other than creating public shareholder value. Also, the control pyramids through which they are entrenched give wealthy families preferential access to capital and enhanced lobbying power. These entrenched families also have vested interests in preserving the value of existing capital. To investigate these arguments, we explore firm-level Canadian data. Heir-controlled Canadian firms show low industry adjusted financial performance, labor capital ratios, and R&D spending relative to other firms the same ages and sizes. We argue that concentrated, inherited corporate control impedes growth, and dub this "the Canadian disease". Further research is needed to determine the international incidence of this condition. Finally, heir-controlled Canadian firms' share prices fell relative to those of comparable firms on the news that the Canada-U.S. free trade agreement would be ratified. A key provision of that treaty is capital market openness. Under the treaty, heir-controlled Canadian firms' labor capital ratios rose, while the incidence of heir-control fell. We suggest that openness, especially of capital markets, may mitigate the ill effects of concentrated inherited control. If so, capital market openness matters for reasons not captured by standard international trade and finance models.http://deepblue.lib.umich.edu/bitstream/2027.42/39596/3/wp209.pd

Inherited Wealth, Corporate Control and Economic Growth

Countries in which billionaire heirs' wealth is large relative to G.D.P. grow more slowly; show signs of more political rent seeking, and spend less on innovation than do other countries at similar levels of development. In contrast, countries in which self-made entrepreneur billionaire wealth is large relative to G.D.P. grow more rapidly and show fewer signs of rent seeking. We argue that this is consistent with wealthy entrenched families having objectives other than creating public shareholder value. Also, the control pyramids through which they are entrenched give wealthy families preferential access to capital and enhanced lobbying power. These entrenched families also have vested interests in preserving the value of existing capital. To investigate these arguments, we explore firm-level Canadian data. Heir-controlled Canadian firms show low industry adjusted financial performance, labor capital ratios, and R&D spending relative to other firms the same ages and sizes. We argue that concentrated, inherited corporate control impedes growth, and dub this "the Canadian disease". Further research is needed to determine the international incidence of this condition. Finally, heir-controlled Canadian firms' share prices fell relative to those of comparable firms on the news that the Canada-U.S. free trade agreement would be ratified. A key provision of that treaty is capital market openness. Under the treaty, heir-controlled Canadian firms' labor capital ratios rose, while the incidence of heir-control fell. We suggest that openness, especially of capital markets, may mitigate the ill effects of concentrated inherited control. If so, capital market openness matters for reasons not captured by standard international trade and finance models.

Inherited Wealth, Corporate Control and Economic Growth: The Canadian Disease

Countries in which billionaire heirs' wealth is large relative to G.D.P. grow more slowly, show signs of more political rent-seeking, and spend less on innovation than do other countries at similar levels of development. In contrast, countries in which self-made entrepreneur billionaire wealth is large relative to G.D.P. grow more rapidly and show fewer signs of rent seeking. We argue that this is consistent with wealthy entrenched families' having objectives other than creating public shareholder value. Also, the control pyramids through which they are entrenched give wealthy families preferential access to capital and enhanced lobbying power. Entrenched families also have vested interest in preserving the value of existing capital. To investigate these arguments, we use firm-level Canadian data. Heir-controlled Canadian firms show low industry-adjusted financial performance, labor capital ratios, and R&D spending relative to other firms the same ages and sizes. We argue that concentrated, inherited corporate control impedes growth, and dub this the Canadian disease.' Further research is needed to determine the international incidence of this condition. Finally, heir-controlled Canadian firms' share prices fell relative to those of comparable firms on the news that the Canada-U.S. free trade agreement would be ratified. A key provision of that treaty is capital market openness. Under the treaty, heir-controlled Canadian firms' labor capital ratios rose, while the incidence of heir-control fell. We suggest that openness, especially of capital markets, may mitigate the ill effects of concentrated inherited control. If so, capital market openness matters for reasons not captured by standard international trade and finance models.