Abstract
Governance scholars and investors traditionally advocate against the use of control enhancing mechanisms, i.e. mechanisms aimed at separating voting and cash flow rights. These mechanisms may, in fact, determine a
deviation from the proportionality principle and may encourage large and controlling shareholders to expropriate minority shareholders. The aim of this article is to contribute to the current debate investigating the implications
of these control-enhancing mechanisms on firm performance. To reach this purpose, we collected ownership data on the (100) largest listed companies per capitalization in five European countries (i.e. France, Germany, Italy, Spain, and the UK). Then we tested the consequences of control-enhancing mechanisms for firm performance using 2SLS regression models. Our results show that (i) mechanisms that lock-in control do have a direct and negative impact on firm performance, and (ii) the negative impact on firm performance of mechanisms aimed at enhancing control by leveraging voting power is mediated by the divergence in voting and cash flow rights.
deviation from the proportionality principle and may encourage large and controlling shareholders to expropriate minority shareholders. The aim of this article is to contribute to the current debate investigating the implications
of these control-enhancing mechanisms on firm performance. To reach this purpose, we collected ownership data on the (100) largest listed companies per capitalization in five European countries (i.e. France, Germany, Italy, Spain, and the UK). Then we tested the consequences of control-enhancing mechanisms for firm performance using 2SLS regression models. Our results show that (i) mechanisms that lock-in control do have a direct and negative impact on firm performance, and (ii) the negative impact on firm performance of mechanisms aimed at enhancing control by leveraging voting power is mediated by the divergence in voting and cash flow rights.
Originalsprog | Engelsk |
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Titel | Proceedings of the 53rd Annual Meeting of the Academy of International Business |
Redaktører | Shige Makingo , Tunga Kiyak |
Udgivelsessted | East Lansing, MI |
Forlag | Academy of International Business |
Publikationsdato | 2011 |
Sider | 92 |
Status | Udgivet - 2011 |
Begivenhed | AIB 2011 Annual Meeting: International Business for Sustainable World Development - Nagoya, Japan Varighed: 24 jun. 2011 → 28 jun. 2011 Konferencens nummer: 53 http://aib.msu.edu/events/2011/ |
Konference
Konference | AIB 2011 Annual Meeting |
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Nummer | 53 |
Land/Område | Japan |
By | Nagoya |
Periode | 24/06/2011 → 28/06/2011 |
Internetadresse |
Navn | Academy of International Business. Annual Meeting. Proceedings |
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Vol/bind | 53 |
ISSN | 2078-4430 |