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Ownership structure, sharing of control and legal framework. International evidence

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Author Info
López de Foronda Pérez, Óscar () (Departamento de Economía y Administración de Empresas, Facultad de Ciencias Económicas y Empresariales, Universidad de Burgos)
López-Iturriaga, Félix
Santamaría Mariscal, Marcos () (Departamento de Economía y Administración de Empresas, Facultad de Ciencias Económicas y Empresariales, Universidad de Burgos)

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Abstract

We analyze the relation between capital structure, ownership structure, and corporate value for a sample of 1,216 firms from 15 European countries. Our results stress two different conflicts of interest and show the differential role played by the mechanisms of corporate control depending on the legal and institutional environment. In common law countries, as a consequence of the relationships between managers and shareholders, capital structure and managerial ownership are the most effective mechanisms of control. In civil law countries, however, as a consequence of the conflicts between majority and minority shareholders, the ownership concentration and the sharing of control within the firm become crucial. In this scenario, the second reference shareholder plays a critical role in contesting the control of the dominant largest shareholder in order to reduce the extraction of private benefits and improve the firm’s performance

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Paper provided by Interuniversitary Doctorate Program "New Trends on Business Administration", Universities of Valladolid, Burgos and Salamanca (Spain). Programa de Doctorado Interuniversitario "Nuevas Tendencias en Dirección de Empresas", Universidades de Valladolid, Burgos y Salamanca (España). in its series Documentos de Trabajo "Nuevas Tendencias en Dirección de Empresas". Working Papers "New Trends on Business Administration". with number 2007-01.

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Length: 26 pages
Date of creation: Jun 2007
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Handle: RePEc:ntd:wpaper:2007-01

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Related research
Keywords: Law and finance approach capital structure ownership structure corporate governance.

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References listed on IDEAS
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  2. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Harvard Institute of Economic Research Working Papers 1788, Harvard - Institute of Economic Research.
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