Private benefits from control of public corporations

Barclay, Michael J.; Holderness, Clifford G.

doi:10.1016/0304-405x(89)90088-3

Cited by 969 publications

(663 citation statements)

References 20 publications

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“…The results are consistent with the hypothesis that the private benefits of control are larger if the controlling shareholders hold the main large proportion of the shares (Barclay and Holderness, 1989;Le Maux, 2004;Zhang et al, 2008). Table 3 also points out that the ability of the controlling shareholder to extract private benefits is lower whenever the firm is cross-listed in the United States (Doidge et al, 2009).…”

Section: Evidence Of the Impact Of Firm Leverage On Private Benefits supporting

confidence: 78%

“…The deviation of cash flow from control rights is measured by the ratio of control rights to stockownership. Other studies have used direct proxies based upon the pricing of stock blocks trades (Barclay and Holderness, 1989;Dyck and Zingales, 2004), the control premium, that is the spread between the prices of two classes of stock, that have one or more control rights (Nenova, 2003;Masulis et al, 2009), the salaries (Ehrhardt and Nowak, 2003), the abnormal related-party sales (Conover and Nichols, 2000) and the amount of connected transactions (Tai et al, 2007;Berkman et al, 2009;Cheung et al, 2009). …”

Section: Measuring Private Benefits Of Controlmentioning

confidence: 99%

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Simultaneous Determination of Firm Leverage and Private Benefits of Control in French Firms

Djebali¹,

Belanes²,

Omri³

2011

IJEF

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This study investigates whether the firm leverage breed private benefits of control in France ; or that is private benefits of control that drive the firm financing policy. Most French firms are family-owned and highly concentrated and hence the controlling power of block-shareholders. Private benefits of control are particularly high in France. They can be extracted by both large shareholders through related-party transactions and managers via their compensation. If debt effectively curbs the private benefits of control, the controlling party is also given incentives to increase debt. Using a sample of 110 listed firms during 2002-2006, our modeling puts in evidence a simultaneous relationship between firm leverage and the private benefits of control. Empirical results reveal that debt is positively associated with related party-transactions but negatively related with excessive managerial compensation. The controlling shareholders are tempted to increase the firm leverage so as to increase their own private benefits. The manager however wants to maintain his private benefits already siphoned off and aims therefore at reducing the firm debt.

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Section: Evidence Of the Impact Of Firm Leverage On Private Benefits supporting

confidence: 78%

Section: Measuring Private Benefits Of Controlmentioning

confidence: 99%

Simultaneous Determination of Firm Leverage and Private Benefits of Control in French Firms

Djebali¹,

Belanes²,

Omri³

2011

IJEF

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“…E mail: joatribo@emp.uc3m.es 1 Examples of seminal papers are Berle and Means (1932), Jensen and Meckling (1976), Grossman and Hart (1980), Schleifer and Vishny (1986) and Burkart et al (1997). 2 Barclay and Holderness (1989), Barclay et al (1993) and Zingales (1994) measure private benefits indirectly by showing that large blocks of ownership that confer voting rights sell at a premium. Interestingly, Barclay et al (1993) find that such premium exists even for some blocks which are not large enough to warrant firm control.…”

Section: Introductionmentioning

confidence: 99%

Ownership structure and minority expropriation: the case for multiple blockholders

Gutiérrez

Tribó

Mariano

2012

Applied Financial Economics

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This article investigates minority expropriation in closely-held firms. Using a sample of Spanish firms for the period from 1996 to 2006, we find that firms that are more vulnerable to minority expropriation have blockholders controlling groups with aggregate equity stakes that are far removed from 50%, which is the point that maximizes the chances of expropriation. Moreover, performance improves when the controlling group's stake moves away from the region where expropriation is more likely -the alignment effect -and, if within this region, when the number of group members increases -the bargaining effect.

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“…Although partial acquisitions are common in corporate life 3 , they received relatively little attention from economists. Especially, the motivation for acquiring a substantial but noncontrolling share of equity, what we will call a silent acquisition (as Bolloré's in Aegis), is not 1 With 30% equity, he would have to launch a tender offer under the british law.…”

Section: Introductionmentioning

confidence: 99%

“…8 Similarly, Kahan (1993) examines cases where a dominant shareholder deriving private benefits from the control of firms engages in transactions at the expense of other shareholders (public value decreasing transfers of control). 9 For example, the estimated premium is 20% on average in Barclay and Holderness (1989). 10 The linkage between productive and financial decisions is an important feature of our model.…”

Section: Introductionmentioning

confidence: 99%

Incentives for Partial Acquisitions and Real Market Concentration

Charléty¹,

Fagart²,

Souam³

2009

JITE

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We analyze the incentives of a controlling shareholder of a firm to acquire, directly or indirectly through his firm, shares in a competitor. We charaterize the conditions under which these partial acquisitions are profitable for this dominant shareholder as well as the equilibrium toehold and its nature: controlling or silent. We find that while this shareholder gains, the acquisition is detrimental to minority shareholders of his firm, or of the target, or even of both. We show that the incentives are enhanced if the dominant shareholder initially holds silent stakes in rivals while controlling interests may discourage them. Moreover, we find that partial acquisitions always lead to a decrease in the joint profit of the two firms involved, and an increase in competitors's profits as the market becomes less competitive.

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Private benefits from control of public corporations

Cited by 969 publications

References 20 publications

Simultaneous Determination of Firm Leverage and Private Benefits of Control in French Firms

Simultaneous Determination of Firm Leverage and Private Benefits of Control in French Firms

Ownership structure and minority expropriation: the case for multiple blockholders

Incentives for Partial Acquisitions and Real Market Concentration

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