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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)

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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Bibliographic 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

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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 34 99
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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;

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Cited by:
  1. Mueller, Elisabeth & Spitz, Alexandra, 2001. "Managerial ownership and firm performance in German small and medium-sized enterprises," ZEW Discussion Papers 01-72, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Elisabeth Mueller & Alexandra Spitz-Oener, 2006. "Managerial Ownership and Company Performance in German Small and Medium-Sized Private Enterprises," German Economic Review, Verein für Socialpolitik, vol. 7, pages 233-247, 05.

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