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Ownership Structure, Sharing of Control and Legal Framework: international evidence

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  • Ãscar López-de-Foronda
  • Félix J. López-Iturriaga

    (University of Valladolid)

  • Marcos Santamaría-Mariscal

    (University of Burgos)

Abstract

We analyse the relation between capital structure, ownership structure, and corporate value for a sample of 1,216 firms from 15 European countries. Our results stress two different conflicts of interest and show the differential role played by the mechanisms of corporate control depending on the legal and institutional environment. In common law countries, as a consequence of the relationships between managers and shareholders, capital structure and managerial ownership are the most effective mechanisms of control. In civil law countries, however, as a consequence of the conflicts between majority and minority shareholders, the ownership concentration and the sharing of control within the firm become crucial. In this scenario, the second reference shareholder plays a critical role in contesting the control of the dominant largest shareholder in order to reduce the extraction of private benefits and improve the firm's performance. Copyright (c) 2007 The Authors; Journal compilation (c) 2007 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Corporate Governance: An International Review.

Volume (Year): 15 (2007)
Issue (Month): 6 (November)
Pages: 1130-1143

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Handle: RePEc:bla:corgov:v:15:y:2007:i:6:p:1130-1143

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Cited by:
  1. Terhi Chakhovich, 2010. "The role of outcome focus within subject positions tied to shareholder value," Qualitative Research in Accounting & Management, Emerald Group Publishing, vol. 7(4), pages 450-475, November.
  2. Azofra, Valentín & Santamaría, Marcos, 2011. "Ownership, control, and pyramids in Spanish commercial banks," Journal of Banking & Finance, Elsevier, vol. 35(6), pages 1464-1476, June.
  3. Ruiz-Mallorquí, María Victoria & Santana-Martín, Domingo J., 2011. "Dominant institutional owners and firm value," Journal of Banking & Finance, Elsevier, vol. 35(1), pages 118-129, January.
  4. Sacristán-Navarro, María & Gómez-Ansón, Silvia & Cabeza-García, Laura, 2011. "Large shareholders' combinations in family firms: Prevalence and performance effects," Journal of Family Business Strategy, Elsevier, vol. 2(2), pages 101-112, June.
  5. Greg Tower & Kelly Anh Vu & Glennda Scully, 2011. "Corporate communication for Vietnamese listed firms," Asian Review of Accounting, Emerald Group Publishing, vol. 19(2), pages 125-146, September.

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