Working Paper: NBER ID: w12675
Authors: Luc Laeven; Ross Levine
Abstract: The bulk of corporate governance theory examines the agency problems that arise from two extreme ownership structures: 100 percent small shareholders or one large, controlling owner combined with small shareholders. In this paper, we question the empirical validity of this dichotomy. In fact, one-third of publicly listed firms in Europe have multiple large owners, and the market value of firms with multiple blockholders differs from firms with a single large owner and from widely-held firms. Moreover, the relationship between corporate valuations and the distribution of cash-flow rights across multiple large owners is consistent with the predictions of recent theoretical models.
Keywords: Corporate Governance; Ownership Structure; Valuation; Cash Flow Rights
JEL Codes: G3; G32; G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| cash flow rights dispersion (G19) | corporate valuations (G39) |
| multiple large owners (G32) | market valuations (G19) |
| ownership types (R21) | corporate valuations (G39) |
| cash flow rights dispersion (G19) | Tobin's Q (G19) |