Disentangling the Impact of Control-Enhancing Mechanisms on Firm Performance: An Empirical Investigation across Five European Countries

Alessandro Zattoni, Torben Pedersen

    Research output: Chapter in Book/Report/Conference proceedingConference abstract in proceedingsResearchpeer-review

    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.
    Original languageEnglish
    Title of host publicationProceedings of the 53rd Annual Meeting of the Academy of International Business
    EditorsShige Makingo , Tunga Kiyak
    Place of PublicationEast Lansing, MI
    PublisherAcademy of International Business
    Publication date2011
    Pages92
    Publication statusPublished - 2011
    EventAIB 2011 Annual Meeting: International Business for Sustainable World Development - Nagoya, Japan
    Duration: 24 Jun 201128 Jun 2011
    Conference number: 53
    http://aib.msu.edu/events/2011/

    Conference

    ConferenceAIB 2011 Annual Meeting
    Number53
    CountryJapan
    CityNagoya
    Period24/06/201128/06/2011
    Internet address
    SeriesAcademy of International Business. Annual Meeting. Proceedings
    Volume53
    ISSN2078-4430

    Cite this

    Zattoni, A., & Pedersen, T. (2011). Disentangling the Impact of Control-Enhancing Mechanisms on Firm Performance: An Empirical Investigation across Five European Countries. In S. Makingo , & T. Kiyak (Eds.), Proceedings of the 53rd Annual Meeting of the Academy of International Business (pp. 92). Academy of International Business. Academy of International Business. Annual Meeting. Proceedings, Vol.. 53 http://aib.msu.edu/events/2011/AIB2011_ConferenceProceedings.pdf