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Expropriation of Minority Shareholders in East Asia

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Author Info

  • Claessens, Stijn
  • Djankov^, Simeon
  • Fan, Joseph P.H.
  • Lang, Larry H.P.

Abstract

We examine the evidence on expropriation of minority shareholders by the controlling shareholder in publicly traded companies in nine East Asian countries. Higher cash-flow rights are associated with higher market valuation. In contrast, higher control rights have an insignificant or negative effect on corporate valuation. Deviations of voting from cash-flow rights through the use of pyramiding, cross-holdings, and dual-class shares, are associated with lower market values. Results are robust to the time period we study, splitting the sample by individual countries, using alternative measures of the incentive for expropriation, and using alternative measures for firm valuation. We conclude that the risk of expropriation is the major principal-agent problem for public corporations in East Asia.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/13966/1/wp2000-4a.pdf
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Bibliographic Info

Paper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2000-4.

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Length: 55 p.
Date of creation: Jul 2000
Date of revision:
Handle: RePEc:hit:hitcei:2000-4

Note: This draft: July 2000
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References

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  1. Randall K. Morck & David A. Stangeland & Bernard Yeung, 1998. "Inherited Wealth, Corporate Control and Economic Growth: The Canadian Disease," NBER Working Papers 6814, National Bureau of Economic Research, Inc.
  2. Abe de Jongand & Rezaul Kabir & Teye Marra & Ailsa Roell, 1999. "Ownership and Control in the Netherlands," Working Papers 1999.22, Fondazione Eni Enrico Mattei.
  3. McConnell, John J. & Servaes, Henri, 1990. "Additional evidence on equity ownership and corporate value," Journal of Financial Economics, Elsevier, vol. 27(2), pages 595-612, October.
  4. Randall Morck & Masao Nakamura, 1999. "Banks and Corporate Control in Japan," Journal of Finance, American Finance Association, vol. 54(1), pages 319-339, 02.
  5. Lucian Bebchuk & Reinier Kraakman & George Triantis, 1999. "Stock Pyramids, Cross-Ownership, and the Dual Class Equity: The Creation and Agency Costs of Seperating Control from Cash Flow Rights," NBER Working Papers 6951, National Bureau of Economic Research, Inc.
  6. Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 81-112.
  7. Lucian Arye Bebchuk, 1999. "A Rent-Protection Theory of Corporate Ownership and Control," NBER Working Papers 7203, National Bureau of Economic Research, Inc.
  8. Ariane Chapelle & Marco Becht, 1997. "Ownership and control in Belgium," ULB Institutional Repository 2013/9979, ULB -- Universite Libre de Bruxelles.
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Citations

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Cited by:
  1. Ross Levine, 2005. "Law, Endowments, and Property Rights," NBER Working Papers 11502, National Bureau of Economic Research, Inc.
  2. Feng-Li Lin, 2013. "Board Ownership and Firm Value in Taiwan - A Panel Smooth Transition Regression Model," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 148-160, December.
  3. La Porta, Rafael & Lopez-de-Silanes, Florencio & Schleifer, Andrei & Vishny, Robert, 2001. "Investor Protection and Corporate Governance," Working Paper Series rwp01-017, Harvard University, John F. Kennedy School of Government.
  4. Cronqvist, Henrik & Heyman, Fredrik & Nilsson, Mattias & Svaleryd, Helena & Vlachos, Jonas, 2006. "Do Entrenched Manager Pay Their Workers More?," SIFR Research Report Series 47, Institute for Financial Research.
  5. Fernando Lefort, 2003. "Gobierno Corporativo: ¿Qué es? y ¿Cómo andamos por casa?," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 40(120), pages 207-237.
  6. Wiwattanakantang, Yupana, 2001. "Controlling Shareholders and Corporate Value: Evidence from Thailand," CEI Working Paper Series 2001-4, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  7. Chandrasekhar Krishnamurti & Aleksandar Sěvić & Željo Šević, 2005. "Legal Environment, Firm-level Corporate Governance and Expropriation of Minority Shareholders in Asia," Economic Change and Restructuring, Springer, vol. 38(1), pages 85-111, 03.

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