RFS Advance Access originally published online on December 10, 2007
Review of Financial Studies 2008 21(2):579-604; doi:10.1093/rfs/hhm068
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Complex Ownership Structures and Corporate Valuations
International Monetary Fund, CEPR, and ECGI
Brown University and the NBER
Address correspondence to Ross Levine, Department of Economics, Brown University, Providence, RI 02912, USA; telephone: (401) 863-2170; e-mail: Ross_Levine{at}brown.edu.
JEL Classification: G32, G34
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Abstract |
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The bulk of corporate governance theory examines the agency problems that arise from two extreme ownership structures: 100% 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.
We thank Robert McDonald (the editor), an anonymous referee, Mike Burkart, Stijn Claessens, Armando Gomes, Luc Renneboog, Karl Lins, Raj Singh, Daniel Wolfenzon, and seminar participants at the University of Minnesota and Tilburg University for helpful comments. Ying Lin provided expert research assistance. This research was initiated while Laeven was at the World Bank. This paper's findings, interpretations, and conclusions are entirely those of the authors and do not represent the views of the International Monetary Fund, the World Bank, their Executive Directors, or the countries they represent.