scholarly journals International private benefits of control: Cross-sectional and time-series analysis

2011 ◽  
Vol 7 (2) ◽  
pp. 7-14
Author(s):  
Nhut H. Nguyen ◽  
Yubo Liu
Keyword(s):  
Investor Protection ◽  
Asian Financial Crisis ◽  
Private Benefits ◽  
Cross Sectional ◽  
Policy Makers ◽  
Controlling Shareholders ◽  
Private Benefits Of Control ◽  
Corporate Scandals ◽  
Weak Evidence ◽  
Private Control

The 1998 Asian Financial Crisis and more recent corporate scandals in the U.S. have triggered growing attention of researchers and policy makers on the agency problem between controlling shareholders and minority investors. One respect of this problem is private benefits of control. In this paper, we extend the findings in Dyck and Zingales (2004) and show that the degree of investor protection still matters in curbing private control benefits for the period 1999–2007. More importantly, we find that private benefits of control have decreased significantly over time. Finally, our analyses show weak evidence of differential decreases in the value of control between weak and strong investor protection countries.

scholarly journals International private benefits of control: New evidence

2011 ◽  
Vol 8 (4) ◽  
pp. 64-83
Author(s):  
Nhut H. Nguyen ◽  
Yubo Liu
Keyword(s):  
Investor Protection ◽  
Private Benefits ◽  
Policy Makers ◽  
Controlling Shareholders ◽  
Private Benefits Of Control ◽  
Corporate Scandals ◽  
Weak Evidence ◽  
Private Control ◽  
New Evidence ◽  
The Relationship

The 1998 Asian Financial Crisis and more recent corporate scandals in the U.S. have triggered an increased attention of researchers and policy makers on the agency problem between controlling shareholders and minority investors. One respect of this problem is the private benefits of control. In this paper, we investigate the relationship between investor protection and private benefits of control. We find consistent evidence with Dyck and Zingales (2004) that the degree of investor protection still matters in curbing private control benefits for the more recent period 1999-2007. More importantly, we find that private benefits of control have decreased significantly over time. Finally, our results show weak evidence of differential decreases in the value of control for weak and strong investor protection countries.

Are controlling shareholders extracting private benefits from European public acquisitions?

2015 ◽  
Vol 11 (1) ◽  
pp. 80-96 ◽  
Author(s):  
Mohamed Firas Thraya
Keyword(s):  
Voting Rights ◽  
High Tech ◽  
Private Benefits ◽  
Cross Sectional ◽  
Controlling Shareholder ◽  
Content Type ◽  
Controlling Shareholders ◽  
Private Benefits Of Control ◽  
European Public ◽  
Cash Flow Rights

Purpose – The purpose of this paper is to examine the incentives of controlling shareholders in the market for corporate control. The author investigates the takeover premiums paid by a sample of European acquiring firms with voting rights structures that are highly concentrated. The results show a positive relationship between takeover premiums and the bidder’s concentration of both voting rights and excess voting rights over cash-flow rights. The author argues that with higher levels of entrenchment, takeover premiums reflect the private benefits of control which controlling shareholders in bidding firms seek to extract from a public transaction. Design/methodology/approach – This paper uses cross-sectional regression analyses to examine the relationship between takeover premiums and the extent to which bidding firm shareholders exert control as well as the arrangement which underlie this. The sample is composed by 210 deals. The data are collected from various databases (Thomson Financial’s Mergers and Acquisition; Faccio and Lang’s (2002); Datastream/Worldscope, LexisNexis). Findings – The premium paid in European M&A transactions is affected by the level of ownership exerted by the controlling shareholder. The results show premiums are positively and significantly associated with higher levels of voting rights, as well as, the level of separation of ownership and control when controlling shareholder ownership is low. Pyramiding structure seems to be the means of separation the most associated with takeover premiums. Research limitations/implications – This paper can be improved by other specifications. First, it would be interesting to analyze premiums paid by firms with dispersed ownership structure and to compare these premiums with those paid by firms with controlling shareholders. Second, the author suggests to examine whether a controlling shareholder occupy the seat of a CEO or a chairman. In these cases, the author assumes that the controlling shareholder can benefit from more discretion and can extract more private benefits. Third, the author suggests extending the sample period to 2007 at least to include the sixth wave. This wave was even more significant than the high-tech wave and has not been studied much. In these cases, the author assumes that the controlling shareholder can benefit from more discretion and can extract more private benefits. Originality/value – Previous studies show that the premium reflects the private benefits of control in privately negotiated transactions (mainly block transactions). In the present study, the author shows that the premium can also reflect private benefits in public merger transactions.

The ultimate controlling owner and corporate governance in Brazil

2019 ◽  
Vol 19 (1) ◽  
pp. 120-140 ◽  
Author(s):  
Vicente Lima Crisóstomo ◽  
Isac de Freitas Brandão
Keyword(s):  
Corporate Governance ◽  
Emerging Market ◽  
Governance System ◽  
Private Benefits ◽  
Controlling Shareholder ◽  
Content Type ◽  
Controlling Shareholders ◽  
Private Benefits Of Control ◽  
Corporate Governance System

Purpose High ownership concentration makes controlling blockholders powerful enough to use private benefits of control and able to shape the corporate governance system to favor their own interests. This paper aims to examine the effect of the nature of the ultimate firm owner on the quality of corporate governance in Brazil. Design/methodology/approach Econometric models are estimated to assess whether the nature of the ultimate controlling shareholder affects the quality of the corporate governance system. Models are estimated using panel data methodology with coefficients estimated by the generalized method of moments system estimator. Findings The results show that the absence of a controlling shareholder has a positive effect on corporate governance, whereas the presence of a controlling blockholder, or a shareholder agreement among a few large shareholders, has a negative effect. This adverse effect holds when the controlling blockholder is a family or another firm. The findings are in line with the expropriation effect given that weaker corporate governance system facilitates controlling shareholders’ ability to extract private benefits of control. The findings also give support to the substitution effect as powerful blockholders take on the management monitoring function by weakening the board. Originality value Following important previous literature, the study investigates the effect of the nature of large controlling shareholders on the adoption of good corporate governance practices. The work provides additional evidence on the effect of the nature of large controlling shareholders on the quality of the corporate governance system in Brazil, taking into account the main kinds of controlling blockholders present in that market. The findings give support to both the expropriation and substitution hypotheses highlighting the presence of the principal-principal agency model in an important emerging market, Brazil.

scholarly journals ”The good, the bad, and the ugly” private benefits of control and their regulatory implications

2008 ◽  
Vol 5 (4) ◽  
pp. 477-491 ◽  
Author(s):  
Alessio M. Pacces
Keyword(s):  
Corporate Governance ◽  
Corporate Control ◽  
Legal Protection ◽  
Corporate Law ◽  
Legal Institutions ◽  
Minority Shareholders ◽  
Private Benefits ◽  
Controlling Shareholders ◽  
Private Benefits Of Control ◽  
The Law

This paper attempts to shed a new light on the economics and the law of corporate governance. It so does by taking stock of the weaknesses of the standard account of how law ‘matters’ for separation of ownership and control. This account fails to explain comparative corporate governance. Both the ownership structure and the functioning of the market for corporate control do not seem to depend entirely on the strength with which non-controlling shareholders are protected by corporate law. Without claiming that legal protection of minority shareholders does not matter in corporate governance, this paper shows that protection and exchange of corporate control is at least as important and so are the legal institutions that support them. This result is derived by introducing a third category of private benefits of control (idiosyncratic PBC), which supplements the more traditional specifications as inefficient consumption of control perquisites (distortionary PBC) or outright expropriation of shareholder value (diversionary PBC).The implications for corporate law are broader than those of the ‘law matters’ framework. Even though legal institutions effectively constrain expropriation of non-controlling shareholders, they may still make corporate governance inefficient when they fail to provide entitlements to uncontested control in dependently of how much ownership is retained by corporate controllers. Likewise, regulation may undermine the takeover process when it restricts side payments that ultimately support efficient bargaining upon the value of corporate control

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