Ownership structure and minority expropriation: the case for multiple blockholders

Gutiérrez, María; Tribó, Josep A.; Mariano, Beatriz

doi:10.1080/09603107.2012.697119

Cited by 7 publications

(8 citation statements)

References 35 publications

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“…In summary, multiple large shareholders can have a positive or negative impact on firm performance, because of the contestability/stewardship effect, or the collusion/pursuit of personal interests/rivalry effect. Considering prior empirical results for the Spanish market that show a positive influence associated with the number of blockholders (Gutiérrez et al, 2012), and results for Western Europe that show a positive impact associated with the existence of multiple shareholders (Laeven & Levine, 2008), we favor the contestability/ stewardship effect associated with multiple blockholders and state:…”

Section: Theoretical Background and Hypothesesmentioning

confidence: 84%

“…Using the ultimate ownership methodology, and, after controlling for endogeneity issues and applying a two‐step Heckman model that avoids selection biases when we analyze relationships separately for subsamples of firms extracted from the main sample, we examine how family company performance is affected by factors that have been discussed in previous research. These include the existence of multiple shareholders and their voting rights relative to those of the largest shareholder (as a proxy of the ability of other large shareholders to challenge the largest one – the contestability effect – see, for example, Gutiérrez, Tribó, & Mariano, ; Jara‐Bertín et al, ; Maury & Pajuste, ). However, we also look at other aspects than can influence family firm value: the final distribution of power, i.e., whether the family has the most voting rights; blockholder identity, extending beyond families and individuals to other non‐financial firms and foreign companies; and shareholder agreements.…”

Section: Introductionmentioning

confidence: 99%

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The Company You Keep: The Effect of Other Large Shareholders in Family Firms

Sacristán-Navarro¹,

García²,

Gómez‐Ansón³

2015

Corporate Governance

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Manuscript Type: EmpiricalResearch Question/Issue: Using a panel of non-financial listed firms over a seven-year period, the authors analyse how the value of family firms is potentially affected by the existence of multiple shareholders, by other large shareholders' voting rights in relation to the family's, by the final power distribution (that is, whether the family's voting rights exceed those of other shareholders), by the identity of the blockholders, and the existence of shareholder agreements. Research Findings/Insights: After controlling for possible self-selection bias and for endogeneity issues, the results of a Heckman two-stage method suggest that other large shareholders' voting rights in relation to the family's do not affect family firm value. The results indicate that what seems to matter is who controls the company in terms of voting power, i.e., whether there is just one large shareholder or other major blockholders as well, and whether they have more or fewer voting rights than the largest owner. The market favors a firm that has multiple large shareholders provided that the family retains control by holding most of the voting rights. However, when there is just one family owner or when other blockholders have more voting power than the family, industry-adjusted family firm value is negatively affected. The existence of shareholder agreements and families and non-financial firms as other blockholders has no impact on company performance, while foreign shareholders tend to increase family firm value. Theoretical/Academic Implications: Academics should take the presence of multiple large shareholders into account as this can affect family power. It is not a question of collusion or contestability per se. The market seems to value other large investors' ability to balance family power only if families retain control by holding the majority of the votes. The preferred model therefore resembles that of a king amid nobility, a "primus inter pares", with other large blockholders (nobility) providing a credible and strong but not overwhelming opposition that benefits minority owners. Practitioner/Policy Implications: When multiple large owners exist, firm value is increased if the family retains power. Ownership structure matters and the effect of other large shareholders' voting rights on minority investors' wealth has to be considered. New variables to describe particular situations in family firms are needed.

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Section: Theoretical Background and Hypothesesmentioning

confidence: 84%

Section: Introductionmentioning

confidence: 99%

The Company You Keep: The Effect of Other Large Shareholders in Family Firms

Sacristán-Navarro¹,

García²,

Gómez‐Ansón³

2015

Corporate Governance

View full text Add to dashboard Cite

show abstract

“…While previous studies have attempted to unravel the linkage between ownership concentration and bank performance (Al-Amarneh, 2014; Ozili and Uadiale, 2017; Mishra and Ramana, 2018), few studies have explored the impact of multiple large shareholders on bank stability and risk. Although there has been a debate on the merits of major shareholders, empirical evidence on the link between corporate governance and firm performance almost exclusively refers to European countries (Italy: Volpin, 2002; Rossi et al , 2018; Spain: Gutiérrez et al , 2012; Finland: Maury and Pajuste, 2005; France: Boubaker, 2007). In recent years, the impact of multiple large shareholders in the Asian context (especially in China) has received significant scholarly attention (Ouyang et al , 2019; Jiang et al , 2019; Cao et al , 2019).…”

Section: Introductionmentioning

confidence: 99%

Multiple large shareholders and bank stability: the case of MENA banks

Boussaada

2021

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PurposeThis study aims to investigate how multiple large shareholders individually and interactively influence Middle East and North Africa (MENA) bank stability.Design/methodology/approachThe empirical framework is based on a generalized dynamic two-step system and utilizes the method of moments estimation to analyze a panel dataset of 532 bank-year observations over the 2004–2017 period.FindingsThe estimation results show that large shareholders are crucial in explaining the differences in bank stability among MENA banks. Specifically, the first- and second-largest shareholders exacerbate bank instability. However, we found that the third-largest shareholder enhances bank stability. Additionally, the coalition between the two largest shareholders increases the moral hazard problem in MENA banks and significantly decreases stability. Meanwhile, the interaction between the three largest shareholders is associated with a control contestability problem, which impels better bank stability. The results support the dispersion effect of multiple large shareholders in MENA countries.Originality/valueThe role of large shareholders in corporate governance is widely recognized. However, very little is known about the role and the real impact that multiple large shareholders may have on the banking sector. To the best of the authors' knowledge, this work is the first to analyze the relationship between multiple large shareholders and bank stability in the MENA region.

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“…Recent studies have emphasized on the importance of the role of a voting coalition, either as a means of monitoring agency costs or of extracting private benefits of control (Jara-Bertin et al , 2008; Boubaker et al , 2016a, 2016b; Gutiérrez et al , 2012; Santos et al , 2015; López-Iturriaga and Santana-Martín, 2015). Accordingly, the variable COALITION 2,3 is included in the model; this variable reflects the ratio between the percentage of votes held by the second and third largest shareholders of the total of the three largest shareholders; DUMMYCOA 2,3 takes on a value 1 if the variable COALITION 2,3 is more than 50 per cent and a value of 0 otherwise.…”

Section: Methodology and Data Analysismentioning

confidence: 99%

“…López-Iturriaga and Santana-Martín (2015) found that in Spain, the coalition has a negative impact on dividends, and they interpret this result as a mechanism for the dominant shareholder to extract private benefits of control. Instead, Gutiérrez et al (2012) found that in Spain, a coalition of blockholders outside the controlling group has a positive effect on performance and can reduce expropriation by performing a monitoring role and boosting the contestability of the ownership structure.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 97%

Financial decisions and ownership structure as control mechanisms of agency problems: evidence from Italy

Rossi

Boylan

Cebula

2018

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Purpose The purpose of this study is to investigate the relationship between financial decisions and ownership structure by using the control contests on a sample of Italian listed companies. Design/methodology/approach The analysis adopts a balanced panel data set of 984 firm-year observations for the period of 2002-2013, with estimation using a generalized method of moments. Findings The results appear to confirm both the hypotheses of the alignment of interests and the entrenchment effect. The entrenchment and alignment effects are not found to be alternatives but rather are found to co-exist. The presence of a coalition of minority shareholders acts as a tool to control agency costs, particularly when the coalition is instrumental in the contestability of corporate control. Practical implications These findings suggest that minority shareholders may have a larger impact than previously identified by strategically aligning with other shareholders to form coalitions. This study provides several practical implications. First, dividend payout is not necessarily a good instrument to control and monitor agency costs. This is because the payout can be used to expropriate benefits from the minority shareholders. Second, high ownership concentration does not always reduce agency costs. Third, a non-collusive coalition can be more useful in the monitoring of agency costs than other tools, such as the debt level. Originality/value This study shows that there is considerable value to the firm when individual blockholders come together in a contestable environment and become instrumental in making business decisions. The results support the contention that contestability is an excellent deterrent to dampen the expropriation of benefits to minority shareholders. This study also provides evidence that cash holding can be a good substitute for dividends and debt in the effort to limit agency costs.

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Ownership structure and minority expropriation: the case for multiple blockholders

Cited by 7 publications

References 35 publications

The Company You Keep: The Effect of Other Large Shareholders in Family Firms

The Company You Keep: The Effect of Other Large Shareholders in Family Firms

Multiple large shareholders and bank stability: the case of MENA banks

Financial decisions and ownership structure as control mechanisms of agency problems: evidence from Italy

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