Cross-Ownership: A Device for Management Entrenchment?

Levy, Marc; Szafarz, Ariane

doi:10.1093/rof/rfw009

Cited by 19 publications

(19 citation statements)

References 48 publications

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“…Otherwise, the resource is overexploited. 28 Comparing equilibrium and socially optimal equity shares. Comparing the equilibrium equity share found in Proposition 2, , and the socially optimal share identi…ed in Proposition 4, SO , we can evaluate whether the equity shares …rms choose during the …rst stage of the game are socially excessive or not.…”

Section: Welfare Analysismentioning

confidence: 99%

“…In the U.S. mutual funds industry, State Street Corporation (STT) owns minority shares in other funds, such as 4.77% of T. Rowe Price and 3.05% in Black Rock. Similarly, T. Rowe Price Group owns 3.28% of STT, and Black Rock Inc. owns 2.68% of T. Rowe Price Group; see Levy and Szafarz (2017). Other examples include only one …rm holding equity shares on their rival's pro…ts, such as Gillette, which owns 22.9% of the non-voting stock of Wilkison Sword, Gilo et al (2006); Ford, which purchased 25% of Mazda's shares in 1979; and General Motors, which acquired 20% of Subaru's stock in 1999; see Ono et al (2004).…”

Section: Introductionmentioning

confidence: 99%

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Common Pool Resources with Endogenous Equity Shares

Kanjilal

Muñoz-García

2021

SBE

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We consider a common pool resource (CPR) where, in the …rst stage, every …rm chooses an equity share on its rivals'pro…ts (cross-ownership) and, in the second stage, …rms compete for the resource. We identify equilibrium equity shares in this setting, and compare them against the socially optimal shares that maximize welfare. Our results show that equity shares are welfare improving under certain conditions, but can lead to a socially insu¢ cient exploitation of the CPR if shares are large enough; as in a merger where …rms equally share equity. We also …nd that, as the number of …rms exploiting the resource increases, socially excessive exploitation occurs under larger parameter combinations. We analyze common policy tools, such as quotas and emission fees, evaluating how they are a¤ected by equity shares; and then compare them against a novel policy tool: optimal equity taxes.

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Section: Welfare Analysismentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Common Pool Resources with Endogenous Equity Shares

Kanjilal

Muñoz-García

2021

SBE

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“…More recently, Levy and Szafarz (2017) studied how cross-ownership linkages may also allow managers (not shareholders) to seize indirect voting rights, hence insulating their …rms from outside shareholders. They discuss how cross-ownership is nowadays a phenomenon that can be found both in civil law countries and, for example, in the US mutual fund industry.…”

Section: Introductionmentioning

confidence: 99%

“…We build on previous literature when we introduce our network framework, which considers the concentration, the transitivity and the consolidation of voting rights in webs of interlocking assemblies of shareholders (Levy and Szafarz, 2017;Levy, 2011;Chapelle and Szafarz, 2007;Crama and Leruth, 2007). However, our purpose is to extract corporate control structures from original shareholding activity, whereas previous works intended to study the corporate power of agents within already assigned control structures.…”

Section: Introductionmentioning

confidence: 99%

“…Until now we followed international standards for concentration of voting rights above 50% by a unique shareholder, with or without consolidation and transitivity. For an example of a more ‡exible de…nition in international law, we may refer to the Article 3(2) of the EU Merger Regulation, where control is de…ned as the possibility of exercising decisive in ‡uence on an undertaking, which can be acquired through purchase of securities or assets or by rights, contracts, or any other means (see http://ec.europa.eu/competition/mergers/legislation/merger_compilation.pdf) 1 0 Please note how the use of a Banzhaf Index in previous works(Levy and Szafarz, 2017;Levy, 2011; Crama and Leruth, 2007) is applied to already de…ned corporate structures in order to assess the distribution of control power within the structure. Here we adopt a di¤erent perspective, as our scope is to identify corporate structures that are embedded in ownership networks.…”

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confidence: 99%

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Global Ownership and Corporate Control Networks

2017

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In this contribution, at …rst, we introduce a basic network framework to study pyramidal structures and wedges between ownership and control of companies. Then, we apply it to a dataset of 53.5 million of companies operating in 208 countries. Among others, we detect a strong concentration of corporate power, as less than 1% of parent companies collect more than 100 subsidiaries, but they are responsible for more than 50% of global sales. Therefore, we show that the role of indirect control, i.e., through middlemen subsidiaries, is relevant in 15% of domestic and 54% of foreign subsidiaries. Among foreign companies, cases emerge of blurring nationality, when control paths cross more than one national border, in the presence of multiple passports (19.1%), indirectly foreign (24.5%), and round-tripping subsidiaries (1.33%). Finally, we relate indirect control strategies to country indicators of the institutional environment. We …nd that pyramidal structures arise less likely in the presence of good …nancial and contractual institutions in the parent's country, as these foster more transparent forms of corporate governance. Instead, parent companies choose indirect control through countries of subsidiaries that have better …nancial institutions, possibly because it is easier to coordinate decisions from remote. Finally, we …nd that o¤shore …nancial centers are preferred jurisdictions for middlemen subsidiaries, probably due to a lower taxation and a lack of …nancial disclosure.

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The relationship between firm reputation and managerial entrenchment

2020

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The present study is concerned about the relationship between firm reputation and managerial entrenchment in listed firms on the Tehran Stock Exchange. In other words, this paper attempts to figure out whether a firm reputation contributes to managerial entrenchment. The multivariate regression model is used for this study. Research hypotheses also examined using a sample of 768 listed observations on the Tehran Stock Exchange during 2012–2017 and by using the multivariate regression model based on panel data technique and fixed effects model. The obtained results show a positive and significant relationship between firm reputation and managerial entrenchment, such that an increase in firm reputation during the time has led to an increased managerial entrenchment. Moreover, the present paper figures out that firm reputation would also lead to narcissism and overconfidence of managers. This paper utilized the exploratory factor analysis for measuring managerial entrenchment and firm reputation, which is a modern method for calculating these two indices. Six indices of board compensation, CEO tenure, CEO duality, reverse distributed earnings, and excessive investment was used for managerial entrenchment. Further, for measuring CEO narcissism by using the exploratory factor analysis, two indices of CEO signature magnitude and cash compensation were converted to a single index of CEO narcissism for the first time which is used for calculating narcissism. This paper is the first study on this topic in the emerging markets, so it provides the users, analysts, and legal institutions with useful information about intrinsic and acquired features of management that contribute significantly to the comparability of financial statements.

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Cross-Ownership: A Device for Management Entrenchment?

Cited by 19 publications

References 48 publications

Common Pool Resources with Endogenous Equity Shares

Common Pool Resources with Endogenous Equity Shares

Global Ownership and Corporate Control Networks

The relationship between firm reputation and managerial entrenchment

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