Expropriation of Minority Shareholders in East Asia
AbstractWe 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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Bibliographic InfoPaper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2000-4.
Length: 55 p.
Date of creation: Jul 2000
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Note: This draft: July 2000
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