The Price Of Power: Valuing The Controlling Position Of Owner-Managers In French Ipo Firms
AbstractGoing public often creates an agency conflict between the owner-manager and minorityshareholders. This problem is especially severe in countries with poor legal investorprotection, such as France. We examine the controlling position of owner-managers inFrench IPO firms. We find that investors anticipate the increased agency conflictassociated with a lock on control and lower firm value when the owner-manager is morepowerful. Shareholder agreements in which the owner-manager agrees to share controlwith other pre-IPO owners enhance firm value. We also report that higher cash flowownership by the owner-manager is positively related to firm value when he is not in fullcontrol. Finally, we document that the large (non-pecuniary) private benefits of controlin France may motivate owner-managers to retain control after the IPO.
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Bibliographic InfoPaper provided by Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam. in its series Research Paper with number ERS-2005-011-F&A.
Date of creation: 29 Mar 2005
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Ownership structure; going public; initial public offerings (IPOs);
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-09-29 (All new papers)
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