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Cross-Ownership Among Firms: Some Determinants of the Separation of Ownership from Control

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Author Info

  • Ritzberger, Klaus

    (Institute for Advanced Studies, Vienna)

  • Shorish, Jamsheed

    (Institute for Advanced Studies, Vienna)

Abstract

This paper demonstrates that the current literature on cross-ownership among firms underestimates the true degree of separation between cash flow rights and voting rights. We use accounting identities to define coefficients of control, such that any (direct or indirect) control of a firm may be identified using these coefficients. This procedure is sufficient to show that under cross-ownership the voting rights associated with ownership are typically underestimated. We demonstrate by example that control and ownership of dividend rights may be entirely separated, and that multiple equilibria may exist in economies with cross ownership.

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File URL: http://www.ihs.ac.at/publications/eco/es-113.pdf
File Function: First version, 2002
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Bibliographic Info

Paper provided by Institute for Advanced Studies in its series Economics Series with number 113.

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Length: 19 pages
Date of creation: Apr 2002
Date of revision:
Handle: RePEc:ihs:ihsesp:113

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Related research

Keywords: Cross-ownership; Ownership and control; Corporate governance;

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References

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  1. 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.
  2. 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.
  3. Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, 04.
  4. Faccio, Mara & Lang, Larry H. P., 2002. "The ultimate ownership of Western European corporations," Journal of Financial Economics, Elsevier, vol. 65(3), pages 365-395, September.
  5. Andrei Shleifer & Robert W. Vishny, 1996. "A Survey of Corporate Governance," NBER Working Papers 5554, National Bureau of Economic Research, Inc.
  6. Larry H. P. Lang & Mara Faccio & Leslie Young, 2001. "Dividends and Expropriation," American Economic Review, American Economic Association, vol. 91(1), pages 54-78, March.
  7. Inés Macho-Stadler & Thierry Verdier, 1991. "Strategic managerial incentives and cross ownership structure: A note," Journal of Economics, Springer, vol. 53(3), pages 285-297, October.
  8. Spagnolo, Giancarlo, 1998. "Shareholder-Value Maximization and Tacit Collusion," Working Paper Series in Economics and Finance 235, Stockholm School of Economics, revised 11 Nov 1998.
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Cited by:
  1. Tom Fischer, 2010. "No-arbitrage pricing under cross-ownership," Papers 1005.0768, arXiv.org.

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