Advanced Search
MyIDEAS: Login to save this paper or follow this series

Corporate Ownership Structures: Private versus Social Optimality

Contents:

Author Info

  • Lucian Arye Bebchuk
  • Luigi Zingales

Abstract

This paper analyzes the inefficiencies that might arise in the ownership structure chosen at the initial public offering stage. We show that, contrary to what is commonly believed, the desire of initial owners to maximize their proceeds leads them to choices that, although privately optimal, may be socially inefficient. This distortion tends to be in the direction of excessive incidence of controlling shareholder structures and excessive divestment of cash flow rights. Our analysis has far-reaching policy implications for dual class stock, stock pyramiding, sale of control rules, and public offerings of minority shares. Among its positive implications, our analysis suggests reasons for the substantial differences in the incidence of control blocks across different countries.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w5584.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5584.

as in new window
Length:
Date of creation: May 1996
Date of revision:
Handle: RePEc:nbr:nberwo:5584

Note: CF LE
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Pagano, Marco, 1993. "The flotation of companies on the stock market : A coordination failure model," European Economic Review, Elsevier, Elsevier, vol. 37(5), pages 1101-1125, June.
  2. Mike Burkart & Denis Gromb & Fausto Panunzi, 1998. "Why Higher Takeover Premia Protect Minority Shareholders," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 106(1), pages 172-204, February.
  3. Grossman, Sanford J. & Hart, Oliver D., 1988. "One share-one vote and the market for corporate control," Journal of Financial Economics, Elsevier, Elsevier, vol. 20(1-2), pages 175-202, January.
  4. Rajan, Raghuram G & Zingales, Luigi, 1995. " What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, American Finance Association, vol. 50(5), pages 1421-60, December.
  5. Julian Franks & Colin Mayer, 2001. "Ownership and Control of German Corporations," OFRC Working Papers Series, Oxford Financial Research Centre 2001fe11, Oxford Financial Research Centre.
  6. Marco Pagano & Fabio Panetta & Luigi Zingales, 1995. "Why Do Companies Go Public? An Empirical Analysis," NBER Working Papers 5367, National Bureau of Economic Research, Inc.
  7. Bebchuk, Lucian Arye, 1994. "Efficient and Inefficient Sales of Corporate Control," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(4), pages 957-93, November.
  8. Roni Michaely & Wayne H. Shaw, 1995. "The Choice of Going Public: Spin-offs vs. Carve-outs," Financial Management, Financial Management Association, Financial Management Association, vol. 24(3), Fall.
  9. Israel, Ronen, 1992. "Capital and Ownership Structures, and the Market for Corporate Control," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 5(2), pages 181-98.
  10. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, Elsevier, vol. 3(4), pages 305-360, October.
  11. Lucian Arye Bebchuk, 1988. "Takeover Bids below the Expected Value of Minority Shares," NBER Working Papers 2524, National Bureau of Economic Research, Inc.
  12. Ritter, Jay R., 1987. "The costs of going public," Journal of Financial Economics, Elsevier, Elsevier, vol. 19(2), pages 269-281, December.
  13. Marco Pagano & Ailsa Röell, 1998. "The Choice Of Stock Ownership Structure: Agency Costs, Monitoring, And The Decision To Go Public," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(1), pages 187-225, February.
  14. Harris, Milton & Raviv, Artur, 1989. "The design of securities," Journal of Financial Economics, Elsevier, Elsevier, vol. 24(2), pages 255-287.
  15. Demsetz, Harold, 1983. "The Structure of Ownership and the Theory of the Firm," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 26(2), pages 375-90, June.
  16. Andrei Shleifer & Robert W. Vishny, 1995. "A Survey of Corporate Governance," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1741, Harvard - Institute of Economic Research.
  17. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, American Economic Association, vol. 77(3), pages 388-401, June.
  18. Holmstrom, Bengt & Nalebuff, Barry, 1992. "To the Raider Goes the Surplus? A Reexamination of the Free-Rider Problem," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 1(1), pages 37-62, Spring.
  19. Barclay, Michael J & Holderness, Clifford G, 1991. " Negotiated Block Trades and Corporate Control," Journal of Finance, American Finance Association, American Finance Association, vol. 46(3), pages 861-78, July.
  20. Ruback, Richard S., 1988. "Coercive dual-class exchange offers," Journal of Financial Economics, Elsevier, Elsevier, vol. 20(1-2), pages 153-173, January.
  21. Nicodano, Giovanna, 1998. "Corporate groups, dual-class shares and the value of voting rights," Journal of Banking & Finance, Elsevier, Elsevier, vol. 22(9), pages 1117-1137, September.
  22. Sanford J. Grossman & Oliver D. Hart, 1980. "Takeover Bids, the Free-Rider Problem, and the Theory of the Corporation," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 11(1), pages 42-64, Spring.
  23. Holderness, Clifford G. & Sheehan, Dennis P., 1988. "The role of majority shareholders in publicly held corporations : An exploratory analysis," Journal of Financial Economics, Elsevier, Elsevier, vol. 20(1-2), pages 317-346, January.
  24. Zingales, Luigi, 1995. "Insider Ownership and the Decision to Go Public," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 62(3), pages 425-48, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Trillas, Francesc, 2001. "The takeover of Enersis: the control of privatized utilities," Utilities Policy, Elsevier, Elsevier, vol. 10(1), pages 25-45, March.
  2. Ehrhardt, Olaf & Lahr, Henry, 2008. "Uncertain private benefits and the decision to go public," CEFS Working Paper Series 2008-02, Center for Entrepreneurial and Financial Studies (CEFS), Technische Universität München.
  3. Pham, Peter K. & Kalev, Petko S. & Steen, Adam B., 2003. "Underpricing, stock allocation, ownership structure and post-listing liquidity of newly listed firms," Journal of Banking & Finance, Elsevier, Elsevier, vol. 27(5), pages 919-947, May.
  4. Lim, Ungki & Kim, Chang-Soo, 2005. "Determinants of ownership structure: An empirical study of the Korean conglomerates," Pacific-Basin Finance Journal, Elsevier, Elsevier, vol. 13(1), pages 1-28, January.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:5584. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.