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Control Dilution And Distribution Of Ownership

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Author Info
Bennedsen, Morten (Department of Economics, Copenhagen Business School)
Fosgerau, Mogens (Center for Economics and Business Research)
Wolfenzon, Daniel (Michigan Business School)

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Abstract

We investigate the patterns of ultimate distribution of ownership in a sample of small closely held corporations. Motivated by recent corporate governance theories we define control dilution as the absenc of a single dominating shareholder. Most firms have one or two ultimate owners implying that control is very concentrated. However, we find strong evidence for control dilution in firms with multiple owners and we proceed to analyze three potential explanations: a general strategic motive, a coalition formation argument and the presence of family ownership. We find the strongest evidence for a general strategic motive and we clearly reject that the observed control dilution is due to family ownership. Finally, we show that the probability of control dilution increases with manager ownership and number of owners, but decreases with the age of the firm and with the presence of family ownership.

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File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/7614
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Publisher Info
Paper provided by Copenhagen Business School, Department of Economics in its series Working Papers with number 16-2000.

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Length: 36 pages
Date of creation: 01 Dec 2000
Date of revision:
Handle: RePEc:hhs:cbsnow:2000_016

Contact details of provider:
Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Phone: 38 15 25 75
Fax: 38 15 26 65
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Web page: http://www.cbs.dk/departments/econ/
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Related research
Keywords: Ownership Distribution; Control Allocation; Closely Held Corporations;

Find related papers by JEL classification:
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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This page was last updated on 2009-11-21.

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