Corporate Ownership Structures: Private versus Social Optimality
AbstractThis 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.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5584.
Date of creation: May 1996
Date of revision:
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