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Benefits of control, capital structure and company growth

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  • Elisabeth Mueller

Abstract

This article studies the influence of the benefits of control on the capital structure and the growth of private companies for a sample of 8964 UK companies with limited liability observed for up to 5 years. It is hypothesized that companies in which existing owners would lose more control if they expanded, have smaller equity increases, are more highly levered and grow more slowly. Potential loss of control is measured as the difference in the probability of winning a vote for the largest owner before and after a hypothetical equity increase. Evidence is found that is consistent with the hypotheses.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 40 (2008)
Issue (Month): 21 ()
Pages: 2721-2734

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Handle: RePEc:taf:applec:v:40:y:2008:i:21:p:2721-2734

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Cited by:
  1. Thomas Poulsen, 2013. "Corporate control and underinvestment," Journal of Management and Governance, Springer, vol. 17(1), pages 131-155, February.
  2. Zimmermann, Volker & Mueller, Elisabeth, 2007. "The Importance of Equity Finance for R&D Activity: Are There Differences Between Young and OldCompanies?," ZEW Discussion Papers 06-014 [rev.], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Cécile Carpentier & Jean-François L’Her & Jean-Marc Suret, 2012. "Seasoned equity offerings by small and medium-sized enterprises," Small Business Economics, Springer, vol. 38(4), pages 449-465, May.
  4. Nancy Huyghebaert & Linda Gucht & Cynthia Hulle, 2007. "The Choice between Bank Debt and Trace Credit in Business Start-ups," Small Business Economics, Springer, vol. 29(4), pages 435-452, December.

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